Avoid pension scams - some DAM important information to consider
Just as the coronavirus crisis has brought out the best in humanity, in the form of selfless healthcare workers and an overwhelming sense of community support, it has also – sadly – dredged up some of the worst. There are some who see the crisis only as an ‘opportunity’ to con people out of their life savings. Fraud overall has spiked since the beginning of the lockdown, as savers are targeted by scammers attempting to lure them to 'safe havens', promising high returns and low risk. In reality however, pension savers that are scammed can be left with nothing. And once the money is gone, it’s almost impossible to get it back.
Why has scamming increased?
According to Unbiased, in terms of raising the threat of pension fraud, the coronavirus brings a perfect storm. The group most at risk from the virus – older people – are also the prime targets for this kind of crime. They will currently be most concerned for their health, isolated from younger family members (who may be more fraud-aware), and worried about their family’s income and potential inheritance. Similarly, those over 55 but still working may be furloughed or out of work, short on cash and anxious about making ends meet. Most of all, the crisis has disorientated everyone, making it harder to distinguish suspicious behaviour from ‘the new normal’ of coronavirus responses.
How do pension scams work?
According to the FCA, scammers usually contact people out of the blue via phone, email or text, or even advertise online. Or they may be introduced to you by a friend or family member who is also unknowingly being scammed. Scammers will likely make false claims to gain your trust. For example claiming they are authorised by the FCA or that they don’t have to be FCA authorised because they aren’t providing the advice themselves, or claiming to be acting on the behalf of the FCA or the government service Pension Wise.
Scammers design attractive offers to persuade you to transfer your pension pot to them (or to release funds from it). It is then often:
- Invested in unusual and high-risk investments like overseas property, renewable energy bonds, forestry, storage units
- Invested in more conventional products but within an unnecessarily complex structure which hides multiple fees and high charges
What are some of the warnings that should alert you if someone is trying to con you out of your pension pot?
The FCA note that scam offers often include:
- Free pension reviews
- Higher returns – guarantees they can get you better returns on your pension savings
- Help to release cash from your pension even though you’re under 55 (an offer to release funds before age 55 is highly likely to be a scam)
- High-pressure sales tactics – the scammers may try to pressure you with ‘time-limited offers’ or even send a courier to your door to wait while you sign documents
- Unusual investments – which tend to be unregulated and high risk, and may be difficult to sell if you need access to your money
- Complicated structures where it isn’t clear where your money will end up
- Arrangements where there are several parties involved (some of which may be based overseas) all taking a fee, which means the total amount deducted from your pension is significant
- Long-term pension investments – which mean it could be several years before you realise something is wrong
What steps can you take to protect yourself from pension scams?
- Step 1 – Reject unexpected offers
- Step 2 – Check who you're dealing with
- Step 3 – Don't be rushed or pressured
- Step 4 – Get impartial information or advice
For further advice or information on pension scams, please do not hesitate to get in touch with DAM - we will offer assitance to help ensure you protect your future throughout this uncertain time. Alternatively, you can contact The Pension Advisory Service, who provide free independent and impartial information and guidance.