More than £30m has been lost to pension scammers between 2017 and 2020, according to national fraud reporting centre Action Fraud, with average losses this year exceeding £50,000 per victim.

The financial regulator the Financial Conduct Authority (FCA) is urging anyone who is saving for retirement to ‘flip the context’ when they are approached by pension offers to help them avoid falling victim to scams. Its research shows that pension holders were nine times more likely to accept advice from someone online than they would from a stranger they met in person. They are five times as likely to be interested in a free pension review from a stranger online than someone in their local pub.

Mark Steward, executive director of enforcement and market oversight at the FCA said, “Imagine a stranger in a pub offering free pension advice and then telling you to put those savings into something they were selling. It’s difficult imagining anyone saying yes to that.

It’s no different online. Whether you’re on social media or checking your emails, if someone offers you free pension advice, ‘flip the context’ and imagine them doing the same thing in real life. Stop and think how you would react.”

Complaints filed with national fraud reporting centre Action Fraud found that losses from pension fraud ranged from less than £1,000 to as much as £500,000. The average victim was a man in his 50s.

How to spot a scam

With fraudsters becoming ever more sophisticated, and the line between outright fraud, and those selling vastly overpriced, unsafe investments blurring, would you know how to spot a scam?

Online pension provider Pension Bee’s ‘Scams Awareness Report’ found that up to two thirds of people failed to identify some of the most common pension scams, including offers of early pension access and free pension advice.

Those who do fall victim to pension scams risk losing decades worth of savings within just 24 hours, according to the FCA’s and the Pensions Regulator’s joint ScamSmart campaign.

Their research found that no-one is safe, and in fact the more educated you are, the more likely you are to fall victim to a pension scam. For example, those who have a university degree are 40% more likely to accept the offer of a free pension review, a tactic often used by fraudsters, than those without one.

Charles Counsell, Chief Executive, TPR, said: “Scammers wreck lives and no matter how big or small your savings are, every pot is a target. It may seem tempting to make a change to your pension fund now, but it’s important not to rush.

Under new regulations set by the Department of Work and Pensions (DWP), if there are signs that a scheme you’re considering transferring to might be a scam, trustees and managers will be able to intervene and delay or stop the transfer until the new scheme has proved its credentials. You can read more about these new laws in our article Government introduces measures to prevent pension scams.

Here, we explain how to spot a scam and what to do if you’re a victim.

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Common types of scam – and how to spot the warning signs

Common types of scam

There are lots of tricks fraudsters use to try to part you from your retirement savings. Here are some of the most common types of scam, and some of the warning signs you need to watch out for. Remember that there are lots of other scams to be aware of too, many of which have emerged during the coronavirus pandemic. Find out more about these in our article Coronavirus scams to watch out for. You can learn about other scams that are currently doing the rounds in our guide Types of scam and how to avoid them.

Pension review scams

With this type of scam, you’re offered a free pension review. Once you agree and hand over details of your current pension arrangements, the scammer will then recommend you transfer your money either into a high-risk scheme, or investments which simply don’t exist. You’re unlikely to see your retirement savings again.

The warning signs: You’re contacted out of the blue and offered a pension review or free help managing your pension.

Boiler room scams

You’ll be called out of the blue and told about an investment opportunity that you can’t afford to miss. Scammers may have found your name on shareholder registers of listed companies, which are publicly available. Firms running this type of scam often operate from overseas but will usually have a UK business address to convince you they’re legitimate.

Often you’ll be told that your pension will be invested in unusual investments such as overseas property, diamonds, forestry or storage units which offer supposedly lucrative returns.

Once you’ve handed over your pension pot, not only are you very unlikely to receive the returns you’ve been promised, but you won’t get your retirement savings back either.

The warning signs: You’re offered too good to be true returns on your pension savings, or a ‘one-off’ investment opportunity, and you’re put under pressure to make a decision quickly.

Pension liberation scams

Companies offer you a ‘loan’, ‘savings advance’ or ‘cashback’ from your pension, telling you that you’re free to access your retirement savings before the age of 55. If you are victim of this type of scheme, you’ll not only have to pay a hefty tax charge to the Government, at least 55% but sometimes as much as 70% of your pension pot, but you’ll also have fees taken from your pension for the transfer, which can be 20% or more of your pension savings.

The warning signs: You’re told that you can release cash from your pension early, even though you’re under the age of 55 (the earliest age you can usually take your pension benefits)

Why we fall for scams

Why we call for scams

There are lots of reasons we fall for scams.

Low interest rates mean that many people have had to put up with earning paltry returns on their savings in recent years, so might be looking for ways to give their pension pot a boost in the run up to retirement. In the wake of the financial crisis and the PPI scandal, people are also increasingly distrustful of banks and might be looking for a new home for their cash.

Returns offered by scammers are usually much higher than those you can earn through your bank, so it’s entirely natural to feel tempted, especially as fraudsters often sound very authoritative or claim to be experts in their area.

Honey Langcaster-James, a psychologist, said: “Scammers employ clever techniques, such as seeking to establish ‘social similarity’ by faking empathy and a friendly rapport with their victims. They can win your trust in a short space of time and by engaging with them you leave yourself vulnerable to losing a lot of money very quickly.”

It can also be difficult to detect what’s a scam and what’s real, especially as fraudsters now use sophisticated technology to develop plausible websites to convince us we’re being offered a genuine opportunity.

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How to avoid scams and protect yourself from scammers

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To make sure your lifetime savings stay yours, it’s important to follow these four simple steps:

  1. Never accept any unsolicited offer to review your pension, even if the person who’s contacted you sounds plausible.
  2. Don’t be rushed or pressurised into making any decisions regarding your pension, even if you’re told it’s a ‘time-limited offer’.
  3. If you are planning to change your pension arrangements, always check that any firm you’re dealing with is authorised by the Financial Conduct Authority. You can do this by checking the FCA Register or by calling the FCA helpline on 0800 111 6768.
  4. You should also get impartial information or advice before making any significant changes to your pension. If you have a regulated financial adviser, it can be helpful to speak with them in the first instance. If you don’t have one, then the government-supported Pensions Advisory Service provides free independent and impartial information and guidance. If you’re aged 50 or over, you can also speak with Pension Wise, another government-supported resource that offers free and impartial guidance about your pension options. You can find a local financial advisor on VouchedFor or Unbiased if you want personal recommendations or advice about your specific circumstances.

    If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.

    Alternatively, if you’re looking for somewhere to start, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.

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You can test how easily you’re able to spot a scam by completing the FCA’s ScamSmart quiz here.

What to do if you think you’ve fallen victim to a pension scam

If you suspect a scam having agreed to transfer your pension, contact your pension provider immediately and ask if they can stop the transfer.

If you think you’re too late and you’ve already been caught out by a pension scam, contact Action Fraud either online or by calling 0300 123 2040. Action Fraud is the UK’s national reporting centre for fraud where you should report if you have been scammed, defrauded or experienced cyber-crime.

You should also report what’s happened to the Financial Conduct Authority either online or by telephoning 0800 111 6768.

Don’t suffer in silence

Falling victim to fraud can not only be financially devastating but can also have a huge emotional impact. Victims often feel foolish and humiliated and don’t want to admit what’s happened to family or friends, even when they are entirely blameless.

If you need to talk to someone about how you’re feeling, contact Victim Support either online or via their support line on 0808 1689111, or Think Jessica, a charity committed to protecting older people from fraud and scams. You can also contact The Samaritans at any time of the day or night on 116 123.

If a pension scam has left you struggling financially, contact Citizens Advice to help you find a way forward. You can speak to an adviser through its national phone service Adviceline, on 03444 111 444, which is available from 9am to 5pm Monday to Friday.