Imagine waking up one day, ready to enjoy your retirement, only to discover your hard-earned pension has vanished. You thought you made the right choice, but it turns out you’ve been the victim of a mis-sold SIPP pension transfer or some other type of pension scam.
It’s a nightmare scenario that many retirees face, leaving them scrambling for answers and financial security. In this article, we’ll explore how to protect your pension from scams and keep your retirement savings safe from fraud.
Understanding Pension Scams
A pension scam is a fraudulent practice in which individuals are persuaded to transfer or cash out their pension savings into a bogus investment.
These tricksters will make unrealistic promises of hefty gains or even suggest that the unfortunate victim’s pension can be accessed before it is due.
These people are usually very persuasive and may pass off as people with credible qualifications or as well-known companies. This is known as cold calling, but they may also resort to text or email messages to reach out to you.
A typical example of fraud is promising to ‘unlock your pension’ while the claimant is under 55. While this may be enticing for some people, it is illegal in most cases, and HMRC might impose severe consequences.
Furthermore, many victims of this type of activity lose every single penny of their pension collection, with almost no possibility of getting their money back.
This loss’s effect on your finances may be so bad that you may not be able to retire comfortably, as you might have to rely on the State for help.
The Role of UK Law in Preventing Pension Scams
Due to the growing menace of pension-related fraud, the UK has implemented several protective legislation for consumers.
To illustrate, the Pension Schemes Act 2021 allows trustees or pension providers to halt or interfere with any transfer made if it raises concerns. This move is meant to protect individuals from transferring their pensions to higher-risk or non-regulated schemes.
In addition, in 2019, the administration also banned making unsolicited phone calls about pensions. It is against the law for anybody to ‘cold call’ about your pension, i.e., Ring you and ask you to give information unless you have consented or you have a prior relationship with that person.
How to Spot a Pension Scam
The best defense against a pension scam is to spot it before it happens. Most of the offers that scammers give are made to look too good to be true, and indeed they are.
Take, for instance, guaranteed high returns or exceptional investment opportunities presented to you by people who claim to have some insider knowledge.
Alternatively, they can mention that you can have early access to your pension, an alarming idea unless you are under some stringent conditions.
Additionally, once you fall into the scammer’s target, they will encourage you to act without delay. This means they might tell you that the promotion is valid for a short period or that there are potential profits – which you will potentially miss – if you do not react quickly.
Bear in mind that any real finance expert will allow you time to think and will not urge you to make a decision.
Another strategy is to use jargon as a means to bewilder you. They might use complex phrases or financial terms in order to gain the trust of the potential victim. In such cases, do not hesitate to ask questions. If you do not understand anything, ask for an explanation.
Protecting Yourself from Pension Scams
The first step to protecting yourself is learning. I recommend that you exercise caution whenever you receive unsolicited communication regarding your pension scheme.
The Financial Conduct Authority (FCA) website has information that can help establish whether a certain company or adviser is operational. There is a list of these companies, and if the one that approached you is off the list, that is a big warning sign.
Secondly, be ready to delay making any decisions regarding your pension. Do not rush into taking up any pension company or scheme offered; consider the position available very carefully.
You can also talk to an independent financial adviser who is registered with the FCA. They are great when it comes to assistance with pension matters since their recommendations are not affected by scams.
Always check the regulatory status from the FCA’s website and ensure that the advisor you are engaging is regulatory authorized.
Lastly, be careful how much personal information you publish online. Criminals will even collect pieces of information found on WhatsApp or social network pictures to create believable rationales and convincing reasons for their scams.
What to Do If You’ve Been Scammed
Should you ever find yourself in a situation where you are a victim of a pension scam, the first thing to do is to remain calm and take action without delay.
For starters, contact your pension provider immediately and inquire whether any movement of funds can be halted. If you detect the fraud in time, you are more likely to be able to retrieve the funds.
You should also file a complaint with either the FCA or Action Fraud. The FCA has a website called ScamSmart that helps people check the legitimacy of an investment opportunity and report scams.
Action Fraud liaises with the police and other agencies to suppress and inhibit swindlers’ operations. You should also consult an attorney specializing in pension recovery. They’ll advice you on the legal options available to you and how to proceed.
Final Thoughts
According to the FCA, people who fall prey to pension scams tend to lose about £46,959 on average. Some have even been robbed of their entire life savings, rendering them incapable of planning for their retirement. In addition, losing that much money can be emotionally devastating.
Do not accept unsolicited offers. Consult only FCA-regulated experts and take all the time you need to make decisions regarding your pensions.
Keep in mind that retirement is not just about enjoying it; you will need funds for health and other needs. Therefore, it is very important to take measures to protect your pension as early as now so that you will be able to enjoy retirement completely without fear of scams.
