Scammers prey on virus worries to fleece pension pots

MONEY is tight in the wake of the coronavirus crisis... and that is just how pension scammers like it.

It means more people are vulnerable to falling for their wiles.

Figures released last November, the most recent available from the Financial Conduct Authority and the Pensions Regulator, found that the average pension scam victim lost £82,000 in 2018.

And it is not just the gullible and those lacking financial knowledge who are being caught out.

The FCA and TPR state: “The more highly educated the person, the more likely they are to fall for a pension scam.

“Those with a university degree are 40 per cent more likely to accept a free pension review from a company they’ve not dealt with before, and 21 per cent more likely to take up the offer of early access to their pension pot, both common scam tactics.” Pension freedom reforms, which allow over-55s to access their entire retirement savings pots in one go, were the catalyst.

Now, with Covid-19 ramping up cash pressures, with interest rates on savings rock bottom, extracting money from pensions can seem an attractive option … and fraudsters are aware of it.

Here is a typical example of what can happen:

“Ruby is 53 years old. She recently re-mortgaged her home to free up some cash for her son’s university costs. She has had a pension scheme for over 30 years and now it is worth £114,000.

“She wants to explore whether she can access it early, so she searches on the internet and is sucked in.

“She is told that she can take five per cent of her pension in cash up front and the rest will be invested in UK storage facilities, which will generate a guaranteed eight per cent return.

“A courier is sent to Ruby and she signs the papers provided. One week later £5,700 is transferred to her bank account and she receives a welcome letter as well as an opening statement showing her pension monies. “From then Ruby hears nothing. When she calls the contact number she had been given and even knocks on the door of the address provided she gets nowhere.

“The upfront payment she received was a deliberate attempt to lure her in from scammers who knew that, if successful, they’d walk away with over £108,000 of her money. By the time she reported it, it was already too late.

“And worse, she is contacted by HM Revenue & Customs and hit with an unauthorised payment tax charge of £62,700 for pulling out her pension money early.”

Be wary of any scheme offering to help you release cash from your pension before you’re 55.

The FCA cautions: “Scammers can be convincing and financially knowledgeable, with credible-looking websites, testimonials and materials that are hard to distinguish from the real thing.

“Scammers usually contact people out of the blue via phone, email or text, or advertise online.

“They design attractive offers to persuade you to transfer your pension pot to them (or to release funds from it).

“It is then often invested in unusual and high-risk investments like overseas property, renewable energy bonds, forestry, storage units; invested in more conventional products but within an unnecessarily complex structure which hides multiple fees and high charges; or stolen outright.”

Never make a rush decision about your pension money.

Beware words like ‘pension liberation’, ‘loan’, ‘loophole’, ‘free pension review’ or ‘one-off investment’ and any approach offering you an investment described as ‘unique’, ‘overseas’, or in a ‘new’ industry. Check with the FCA, TPR, Money Advice Service, Pension Wise or use Eastcote Wealth Management.

Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners,

based in Solihull. Email: tlaw@eastcotewealth.co.uk The views expressed in this article should not be construed as financial advice