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Pension savers are set to receive stronger protection from scams under new measures announced last week, as the Government looks to stay ahead of increasingly sophisticated fraudsters targeting people’s retirement savings.
Under the Government’s proposals, if a saver has contacted their pension provider and requested a transfer into a small self-administered scheme (SSAS) with which they have no clear link, a new warning flag would be triggered that would enable the transfer to be stopped.
The protection has been introduced due to mounting evidence that SSASs, which are a form of occupational pension scheme typically established by company directors for themselves and key employees, may be more vulnerable to the potential for fraudulent misuse than other types of pension schemes. The government is concerned that the limited oversight there is over this kind of scheme may have led to “poor practices and, in some cases, the possibility of deliberate and organised misuse”.
Torsten Bell MP, Minister for Pensions, said: “Pension scams can rip away not just people’s savings, but the retirement they are looking forward to. This Government is determined to stay one step ahead of criminals who seek to exploit savers.
“Too often we see fraudsters trying to trick workers into transferring their savings into bogus pensions. We are stepping in to automatically block transfers where the warning signs are flashing red.”
The consultation is also looking for views on ways to cut red tape that has been slowing down legitimate pension transfers, making the process simpler for savers who are not at risk of pension fraud.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. 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.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
How pension scams work
Pension scams typically involve fake promises of guaranteed investment returns or offer savers early access to their pensions. 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.
Some experts fear that pensions falling into the scope of inheritance tax next year could trigger a wave of new scams, as people review how their retirement savings are structured and passed on to their loved ones. Mike Ambery, Retirement Savings Director at Standard Life said: “With less than a year to go until inheritance tax applies to unused pension pots, it’s understandable that many people are reassessing how their retirement savings are used and passed on. However, scammers thrive on fear and uncertainty – when people feel unsettled or rushed, they’re more likely to fall victim to a scam.
“As we move closer to the rule change, fraudsters are likely to prey on any confusion, perhaps presenting themselves as offering so-called ‘solutions’ such as moving pension savings into arrangements that claim to avoid inheritance tax altogether. Offers like these might sound reassuring, but they can put people’s retirements at serious risk – the average pension scam costs victims around £47,000.”
Staying safe from scams
If you are contacted about an investment opportunity, take a moment to stop and think before parting with your retirement savings and don’t be rushed into making a decision. Legitimate organisations will never pressure you into investing on the spot and you can always reject, refuse or ignore any requests. Only fraudsters will try to rush or panic you.
Always check if a financial services firm you’re considering dealing with is authorised by the FCA for the services being offered. You should also confirm that the contact details match those listed on the FCA’s Firm Checker.
If you think you might have fallen victim to a scam having agreed to transfer your pension, contact your pension provider immediately and ask if they can stop the transfer.
If you’ve already been caught out, contact Report Fraud either online or by calling 0300 123 2040. Report 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.
You can read more about pension scams and how to protect yourself in our guide Don’t let scammers steal your retirement.
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If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide Chartered independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial adviser. 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.
Fidelius are rated 4.7 out of 5 from over 2,600 reviews on VouchedFor, the review site for financial advisers.
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