Change has come quick and fast to the pensions world in recent times. We now have a much broader range of options when it comes to how to save for retirement and greater freedom in terms of choosing investments for pensions. While this means that we have more control over our money it also increases vulnerability and the scope for scammers to succeed. So, how do you protect yourself from scams while navigating this new pensions landscape?how to avoid pension scams

Don’t take cold calls

The Pensions Regulator specifically highlights unsolicited phone calls, emails or texts as a prime source for pension scams. So, if you get a call or email out of the blue then be very wary. Most reputable organisations simply wouldn’t do this kind of cold marketing when it comes to their products so it’s far more likely to be a scammer.

Be cautious of unregulated investments

Pensions themselves are regulated but there are all sorts of investments for retirement that are not. For example, you might be offered the opportunity to invest in something glamorous, such as a vineyard in France or a hotel in the Caribbean. This could be pitched as an exciting investment with “guaranteed returns.” The trouble is that if you put your cash into one of these unregulated investments and something does go wrong then you don’t have any access to the Financial Ombudsman Service or Financial Services Compensation Scheme. You’ll also have no real way of knowing how competent the business is that’s handling your money.

Don’t be lazy

If a friend tells you about this fantastic investment opportunity for your pensions cash then look into it thoroughly. So many people have lost money through schemes that are recommended by a friend and that recommendation is trusted 100%. Make sure that you take on the responsibility of fully understanding what you’re getting into – read all the small print. If you unwittingly get scammed because you didn’t bother to fully understand what was being sold to you then the only person who will lose out is you.

Think carefully about an annuity

Since recent changes have enabled those over 55 to release cash from pensions and not purchase an annuity, many people now have a lot more freedom when it comes to what to do with pensions cash. However, it’s a good idea to think carefully about whether that annuity might actually be a good idea. An annuity is designed so that a lump sum is purchased up front to provide a regular retirement income for the rest of your life. If you don’t take the opportunity to buy an annuity then have you really thought about how you’re going to pay for the rest of your retirement?

If you’re nervous then choose big brand names

Margaret Snowdon, the Chair of the Pensions Liberation Industry Group, has said she is “reasonably confident that £1 billion has gone to scams.” When it comes to pensions fraud, figures are thought to be grossly under-reported. There are two reasons for this: firstly, scammers often pay out under investments for the first year or so as this provides a false sense of security and allows them to complete the scam and disappear. Secondly, many who have been caught by a pensions scammer are so ashamed that they don’t tend to report it. So, there is a lot to be wary of when it comes to pensions investments – if in doubt, opt for the big brand names where you know products will be regulated and providers will be accountable.

Nothing is guaranteed

Many pensions investments offer “guaranteed” returns. However, the reality is that nothing is guaranteed. Investments are by their nature a high risk endeavour so anyone who attempts to sell a product on the basis of a “guaranteed” returns is highly likely to be either fraudulent or inept.

Avoid anything that is time sensitive

It is a trick that scammers often use to tell potential victims that there is an element of time sensitivity to an investment or deal. This “one day only” type approach enables scammers because it means paperwork is often not read and the consequences of an investment being made are not really thought through. Take your time when it comes to deciding what investments to make and then give yourself enough opportunity to read all the paperwork and think through whether this really is the right investment for you.

Follow a couple of basic rules

Ultimately there are two key rules that will help you to keep your pension pot safe if you follow them:

  1. Only deal with businesses registered with the Financial Conduct Authority (FCA)
  2. Don’t put your pensions cash in the hands of an overseas business that the FCA can’t reach


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