How to Avoid and Spot Pension Scams


Pension scams have hit the headlines again this week. In recent years, “pension freedoms” have enabled more and more people to get caught up with suspect ‘investments’, where bogus companies persuade you to part with your pension pots. Even for people under the age of 55, many are enticed into scams where the intention is to see their money go a bit further, so they can enjoy a comfortable retirement. However, in reality, some people lose every penny they have ever worked for.

Our motto is: if it sounds too good to be true, it probably is… So, this week, we have listed a few typical pension scams and phrases to watch out for:

“Pension liberation”

If someone calls you, or writes to you out of the blue, using the above phrase, this should set off alarm bells. “Pension liberation” scams are where people are persuaded to either cash in their pension pots or transfer their money into certain investments. Typically, you would receive a cold call and then be sent a letter or a brochure. You are likely to be presented with some ‘interesting’ ways for you to invest your pension money. You may be told that you can take money out of your pension before the age of 55 (you usually can’t unless you fall seriously ill). Remember, if you have made provision in your pension for withdrawal before 55, you could be liable for a huge tax charge and transfer fees from your provider (up to 55%). Other words to watch out for are ‘loan’, ’loophole’ and ‘one-off investment’.

“Overseas investment”

One of the most common types of pension scam involves being persuaded to hand over money to go into an “overseas investment”. For obvious reasons, different countries are governed by different rules and, therefore, your money is unlikely to be protected by UK law.

Typical overseas investments include the following:

• Foreign property – some of which will either not exist or will never be built…

• Foreign businesses – covering all sorts of industries including hotels, vineyards and plantations, you could be enticed by phrases such as ‘new industry’, environmentally friendly’ and ‘unique’ – these days, there’s rarely a truly unique offering in any business sector…

• Foreign charitable projects – although there are some genuine overseas charities who do some great work, there are many unscrupulous people who will pull on your heartstrings and manipulate your emotions by trying to persuade you to give money to a project that will ‘better someone’s life’, usually a young person or a child. In reality, the project may not even exist and your money could be going into an unknown bank account…

“Self-Storage Units”

Earlier this year, the Serious Fraud Squad issued a warning relating to people who have been persuaded to invest their pensions into self-storage units or storage pod investment schemes. Thousands of investors have been affected by this particular type of pension scam – read more about this in our blog article, Worried about the £120m Pension Scam?

Warning: Whether it’s cash, a pension or any other type of savings, never invest unless you are 100% confident that you are dealing with a reputable, fully insured company. Never ever agree to take out a lump sum or your whole pension before carrying out thorough security checks on the company offering you the investment.

Please, if something like this has caught your eye, please speak to one of our professional advisers who will happy to give their expert view.

On the subject of pensions, if you have a final salary/defined benefit pension scheme and you need to know what your options are, then why not download our pension guide?

For a general guide to retirement planning, please visit our Big Life Events – Retirement page.

If you have been offered an investment opportunity, which you think may be a pension scam, please get in touch to speak to one of our financial planners for advice. We would be more than happy to review your existing pensions and help you plan for a safer retirement.