Protecting yourself from pension fraud
Posted by Matthew Andrews on October 1st, 2024.
Your safety and the security of your money is our highest priority, and we implement stringent safeguarding measures to protect all our customers. However, it’s also important for you to take steps to shield yourself from fraud.
To assist you in identifying potential scams and staying secure, we are publishing a series of articles focused on fraud protection. This article specifically addresses pension fraud.
What is pension fraud?
Pension fraud occurs when someone attempts to deceive you into transferring some or all of your pension to them. Scammers often pose as investment advisors, offer free pension reviews, or claim to have found a ‘loophole’ that allows you to withdraw your pension early or tax-free.
These fraudsters usually contact you unexpectedly, pressuring you to make quick decisions or presenting offers that seem too good to be true.
An Example of Pension Fraud
Hugh had recently retired and was considering how best to manage his pension. One day, he received a call from Simon, a so-called specialist at an investment company, offering to review his pension arrangements. Hugh had heard positive things about the company, and Simon seemed friendly and professional, so he agreed.
Simon suggested that Hugh could maximize his pension by withdrawing a lump sum and investing it with his company, which had a range of low-risk, high-return portfolios.
Hugh decided to withdraw 25% of his pension tax-free, and with Simon’s assistance, transferred the funds to a company account. Although the account was under a different name, Simon reassured him that it was a protected holdings account, separate from the main business.
Simon promised that Hugh would receive a welcome pack and a statement within five working days, but nothing arrived.
When Hugh contacted the company to inquire about his investment, they had no record of the transaction. Simon had been impersonating a legitimate specialist, and Hugh’s funds were lost.
Five tips on how to protect yourself
Don’t trust cold callers
Cold calling about pensions is illegal, so if you receive an unsolicited call about your pension, it’s likely a scam. Even if the caller seems genuine, they’re breaking the law, so it’s best not to trust them with your money. If you receive an unexpected call regarding your pension, hang up immediately.
Similarly, be cautious of unsolicited emails, letters, texts, or social media messages.
Watch for Warning Signs and Stay Calm
Scammers often try to manipulate your emotions to prevent you from thinking clearly. They may use high-pressure tactics, rushing you into decisions by setting time limits or tempting you with promises of massive returns.
It’s essential to stay calm, slow down, and take time to consider your decisions carefully. If someone pressures you to make a quick decision, it’s a significant warning sign.
Be suspicious If an offer sounds too good
Be wary of offers that seem too good to be true. If a company promises high returns with low risk or offers a way to access more of your pension tax-free, it’s probably a scam.
Look out for terms like ‘loophole,’ ‘pension liberation,’ and ‘savings advance.’ Be cautious of any company offering new, unusual, or lesser-known methods of managing your pension.
Verify If an opportunity Is genuine
Before making any changes to your pension, ensure the opportunity is legitimate. Verify that you are dealing with the real company and not someone impersonating them by contacting the firm using official contact details.
Make sure you navigate to a company’s website by typing the URL directly into your browser. Clicking on an email link or an advert could lead you to a cloned website.
You can check a company’s credentials on the Financial Conduct Authority’s (FCA) Register. If they’re not FCA-authorised, you won’t be protected by the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS), and your money could be at risk.
The FCA also maintains a Warning List of companies known to be operating without authorisation or being cloned by scammers.
Seek advice and guidance
It’s always wise to discuss any financial plans with others. Friends and family can provide a fresh perspective, helping you avoid hasty decisions, while a pension specialist can offer expert advice.
The Money and Pensions Service provides free, impartial guidance, and its Pension Wise service offers a government-backed appointment with a pensions specialist to explain your options and provide more information on pension scams.
You might also consider consulting a private financial advisor. Just ensure they’re FCA-regulated and follow the advice mentioned earlier when selecting an advisor.
If you’re targeted by scammers
If you suspect that someone is attempting to scam you, report it to Action Fraud by calling 0300 123 2040 or using their online reporting tool. You should also notify the FCA.
If you’ve agreed to transfer your pension but now suspect it’s a scam, contact your pension provider immediately. They might be able to block the transfer if it hasn’t been completed.
The Money and Pensions Service can also assist through MoneyHelper, its consumer-facing arm. Their experts can guide you on the next steps.
Victims of pension fraud may also be targeted for ‘secondary’ scams, where criminals claim they can help recover lost funds or use stolen details for another scam. Stay vigilant if you’ve been a victim, and be cautious.
Victim Support also offers free, specialised assistance for those affected by pension fraud.
More information on pension fraud
The organizations and websites mentioned above, particularly Pension Wise, offer a wealth of information, guidance, and resources. You can also find useful articles on the MoneyHelper website.
In addition to checking the FCA’s Register and Warning List, the FCA website has further resources for consumers and firms. The ScamSmart tool can help you evaluate investment opportunities.
Action Fraud, the UK’s cybercrime reporting centre, and Victim Support also provide valuable resources.
Finally, we at TorFX are always here to help our customers. If you have any concerns or questions about the security of your TorFX funds or need guidance regarding a transfer, please don’t hesitate to contact us.
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