Pension scams are on the increase in the UK

‘One-off’ pension investments, pension ‘loans’ or upfront cash are being used to entice retirement savers. For most people the offers will be bogus. Members who are taken in, will lose most, if not all of their savings. It remains the law that members can only take up to 25% of their pension savings as a cash lump sum after the age of 55, with very few exceptions, such as serious ill health. Although this may change from April 2015, it’s important that members aren’t fooled into thinking that this is the law today. Members may lose out financially both in loss of savings and tax charges, which they may be subject to, of over half their transfer value for taking an unauthorised payment.

Pension scams can take many forms. Some scams will appear to be legal, and some of the people that offer them may even suggest that the Government has asked them to contact members. Here are some common features of pension scams:

  • Phrases like ‘one-off investment opportunities’, ‘free pension reviews’, ‘legal loopholes’, ‘cash bonus’, ‘government endorsement’
  • Victims are approached out of the blue over the phone, via text messages or in person door-to-door
  • Transfers of money or investments overseas, meaning the money is harder to recover
  • Access to pension pot before age 55
  • No member copy of documentation
  • Victims encouraged to speed up transfer of their money to the new scheme.

Scams may be presented as unique investment opportunities. Many will get the victim’s attention by offering a free pension review. Members will often be encouraged to transfer their pension quickly, and they may be expected to sign documents brought to them by courier. Once the pension is transferred, it’s too late. Many victims will lose their entire pension and have to pay a large tax charge on top.