The fraudster’s greatest prize — your pension

FrAudSterS are happy to get any money they can, but one pot remains the ultimate prize: your pension. With many people sitting on large savings — and pension freedom rules making it easier to take control of your money — scammers have identified the perfect opportunity to cash in.

Financial Conduct Authority (FCA) research reveals that, in the first six months of 2021, more than £2million was reported lost to pension scammers, with the average loss amounting to £50,949. But anti-scam campaigner Mark taber believes this is likely just a fraction of the true amount, with many victims unaware they’ve been cheated.

So how do these scams work and why are they so effective?

the fraudsters know savers worry whether their money will go far enough in retirement, and so they tout alternative pension investments which they claim will boost retirement income — often with returns of 8 pc per year.

In recent years, pension scams have focused on things such as overseas property investments, airport car parks, storage units and renewable energy bonds. While these can be dressed up to sound attractive, in reality the investments are highly risky or even fictitious.

After the arrival of the pension freedom rules in April 2015, savers reported a plague of cold calls, trying to persuade them to re-invest their pensions. Now a ban on pension cold calling, which began in 2019, has driven the crooks to look elsewhere, including by setting up online adverts.

Often scammers want to get your details to send plush brochures by post, looking like they come from reputable investment firms, then call you afterwards.

According to the

Pensions regulator, warning signs of pension scams include guarantees of high returns and complicated investment structures. Other red flags relate to the firm itself — in particular if it isn’t FCA-registered.

‘Beware of things that signal illegitimacy,’ says Myron Jobson from Interactive Investor. ‘If a firm doesn’t allow you to call back, it’s most likely because it is a fraudulent enterprise. Also, avoid firms that only list mobile phone numbers or a P.O. box address on their website.’

Pension scammers are known for offering would-be victims a free ‘pension review’, or advice on how to cash in their savings. But this isn’t always what it seems. though such moves are possible, they often leave savers with a heavy tax bill — which scammers don’t mention.

‘Schemes offering to unlock your pension before age 55 should be avoided at all costs,’ says Mr Jobson. ‘the scammers are trying to get you to break the rules, which will likely result in huge administration and tax costs, potentially leaving you with no retirement savings.’

Charity Age uK advises anyone considering transferring their pension to take extreme caution.

As well as checking that the firm you’re dealing with is fully FCAregulated (and isn’t a clone firm), they also suggest that savers keep seeking independent financial advice.

the government-backed Money Helper, which you can find at moneyhelper. org.uk — can give free information and advice to savers.

If you fear you’ve been caught in a pension scam, report it to Action Fraud, the uK’s national reporting centre for fraud.

Be aware, though, it’s notoriously

difficult to get your money back, so take great care.