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Pension scams study finds almost 90% of people would miss warning signs

    The croupier holds a roulette ball in a casino in his hand. Gambling in a casino.


    Nearly nine in 10 people would fail to spot common warning signs of a pensions scam – such as the promise of unusually high investment returns and offers of “free financial advice” – research has found.

    A study from Citizens Advice showed Britons mock adverts and asked which one they would be most likely to pick if they were seeking help with their pension.

    Some 88% opted for scams promising free advice, early access to that person’s pension or high investment returns of 10% or 15% or claiming to be “approved by government pensions department”.

    Just 12% opted for an ad intended to show a legitimate pension offer, which promised returns of 5% and said the firm was authorised by the Financial Conduct Authority (FCA).

    New pension freedoms were introduced nearly a year ago to give people aged 55 and over more choice over what they do with their retirement pot.

    But concerns have also been raised that the freedoms give fraudsters extra opportunities to scam people out of their cash.

    Despite the findings from Citizens Advice, the research among more than 2,000 people also found many feel confident they could spot a fraudster.

    Three-quarters (76%) said they were confident they could identify a pension scam – even though just 12% were actually able to do so when a scam was presented to them.

    The report also reveals people are particularly at risk of scams from phone calls, post and emails which come out of the blue. Citizens Advice estimates that up to 10.9 million consumers received unsolicited contact about their pension in the last year.

    Nearly two-thirds of consumers (64%) say they would consider an unsolicited offer about their pension and many would only consult informal sources about whether the approach is genuine, such as asking family members what they think.

    When asked how they would check whether a pension offer was legitimate, only one third (33%) of people said they would make sure the company is listed on the FCA’s online register, which can be used to check whether a company is authorised to give regulated advice.

    Citizens Advice said a 59-year-old man sought its help after a near miss with a pension scam. He was cold called by a company offering a “free pension review” which recommended he invest his retirement savings in Hong Kong.

    The man was offered an appointment the next day but when documents were couriered to his home, he realised something was wrong and refused to sign. He has since been helped by Citizens Advice to stop the company from contacting him again.

    Citizens Advice said that in addition to the significant financial losses for consumers, scams can pose a risk to the wider confidence in the pension system. This can affect consumers’ saving levels, investment choices, use of pension freedoms and use of financial guidance or advice.

    Gillian Guy, chief executive of Citizens Advice, said: “Fraudsters have shifted their tactics to rob people of a retirement income.

    “It’s difficult for consumers to stay ahead of pension scams as they evolve. Many scammers use professional looking websites and leaflets to fool their victims into signing up to free pensions advice or cold call with offers of unusually high investment returns.”

    She continued: “If you are over 50, Pension Wise guidance can equip you with the knowledge of what to look out for to avoid falling victim to scams.”

    Here are some top tips from Citizens Advice for identifying a pension scam:

    :: Ignore any contact you receive out of of the blue about your pension. This could be in person, online, on the phone or in the post.

    :: Be wary of any offer to access your pension before 55. Accessing your pension early can mean you are hit with a high tax bill of 55%, as well as losing any pension savings in a scam.

    :: Do not feel pressured to make a decision about your pension straight away, instead take your time.

    :: Watch out for extravagant sounding investments based overseas.

    :: Check the FCA online register to make sure the company approaching you is legitimate. Anyone giving financial advice should be registered.

    :: If you are making an investment, check the FCA ScamSmart warning list for known investment scams.

    :: If you are transferring a pension, ask your current pension provider to check the HM Revenue and Customs (HMRC) registration of the new scheme to check it is legitimate.

    Pensions minister Baroness Altmann said: “Scammers wreck lives and we’re working tirelessly to shut down illegal schemes and bring these criminals to justice.

    “Reputable financial organisations will not call you out of the blue, so if someone contacts you about your pension or with offers of a pension ‘review’ I would suggest just hang up or delete the email.

    “Our advice to anyone who is nearing retirement and wants to talk through their options is to call Pension Wise, our unbiased Government information and guidance service, or contact TPAS (the Pensions Advisory Service).”

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