Pension scams: what everyone must watch out for

Our pensions expert outlines some of the key warning signs that you may be the target of a pension scammer.

A pension is likely to be the biggest pot of money many people will ever have to their names. So naturally, they have attracted the attention of scammers. And all too often they are proving easy pickings.

It can often be all the money someone has, so the effects of falling for a scam can be devastating.

While older people are often targeted, you don’t have to be a pensioner to be the victim of a pension scam.

Younger workers with workplace pensions or personal pensions can be targeted, too. They are very similar to investment scams, but some approaches are unique to pensions.

Here are some of the key things to know about pension scams, and how to avoid falling for them.

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Unlocking early

Promises of special privileges being granted to you outside of normal pension arrangements are a warning sign.

For example, you may be offered the chance to unlock your pension early; so-called liberation scams.

Your pension will have a minimum pension age written into the scheme rules and you cannot access your pension until this age, so being offered this could be an alarm bell.

Don’t believe those who tell you that you can, and they can help you do it. Confusion around minimum pension ages could feed into this kind of scam, unfortunately, particularly as minimum pension ages rise and more people are likely to be tempted by the promise to access it early.

Avoiding taxation

Promises that you can avoid tax by transferring your pension to another scheme are another potential red flag, particularly if it’s an overseas scheme.

As well as the risk of being defrauded, there could be a legal risk if you agree to take part in a scheme to reduce your tax that falls foul of the tax rulebook.

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High returns

Promises of higher returns than you are currently receiving from your pension scheme through esoteric-sounding investments with high ‘guaranteed’ rates of return, fall into the suspicious category too.

Even if something like this is not an attempt to defraud you, it is always worth remembering that higher investment returns come with higher risk.

As with all investments, if you don’t understand how the returns are being achieved it may be best to stay away.

Cold calls

Receiving a cold call from people claiming to be from your pension provider is a potential red flag.

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This is because pension providers do not usually call to offer you anything or ask you to transfer or withdraw any money. In most scenarios, it’s up to you to instigate any movement to or from your pension.

High-pressure sales tactics

If someone tells you that you need to send them your pension money soon to benefit from a great opportunity, it’s likely to be a scam.

It’s always worth asking yourself; if this really is so great, why is this person having to push so hard to get people to go for it?