Fraudsters promise high returns and low risk but, in reality, pension savers that are scammed are usually left with nothing.
When savers realise they’ve been scammed, it can be devastating – many lose their life savings. Once the money is gone, it’s almost impossible to get it back.
You can help pension savers avoid falling victim to a scam.
Scammed out of his retirement. Don’t be next.
Geoff’s story (extracted from The Pensions Regulator’s publication)
Tricked into being part of the scam
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Bold text highlights typical hallmarks of a scam. These are based on real life experiences of scam victims. |
Age: 56
Situation: Two company pensions that he’s been paying into for 30 years altogether
Investment offer: overseas property developments
Geoff is looking forward to his retirement. Now he can access his pension more flexibly, he’s been thinking about how to spend his money – he wants to help his daughter with a deposit for a flat, and is hoping he’ll have a bit left to do up the house and maybe upgrade his car.
His friend mentions an investment opportunity he’s bought into, where he got 30% of the value of his pension pot upfront, plus promises of good annual investment returns. Geoff’s interested and agrees to have a chat with Chris, his friend’s financial adviser. Chris explains that he just needs to sign a document saying he wants to transfer his pension into another scheme, and the money will then get invested in a hotel complex in an up-and-coming tourist region overseas.
Geoff has a read of the brochure Chris gives him and checks out the website, both of which look very credible – they’ve got government logos and mention the Financial Conduct Authority. He knows he has to act quickly as the offer expires in a couple of days so decides to go for it. You only live once.
Within a couple of hours, a courier comes round with some papers to sign. Geoff has a quick look through and notices that they say he is now a company director and trustee of his pension scheme. He’s a bit confused by that but assumes it’s probably all fine, and the courier’s waiting, so he signs on the dotted line.
Geoff gets some of his cash upfront and spends it on home improvements. He wants to know when he can get the rest of the lump sum, so he tries to call Chris to find out. The line is disconnected, so he searches online and is unable to find any contact details for Chris or his firm.
After several more months of trying to locate Chris and the missing money, Geoff calls The Pensions Advisory Service for advice. It quickly becomes apparent that he has probably lost all his pension savings. By signing the papers and becoming a company director, he has also taken on new legal duties with Companies House and HMRC that he didn’t know about. This leads to HMRC fining him for tax-related offences. Now Geoff can’t help his daughter buy a flat, and he’ll have to keep on working for far longer than he’d planned so he can pay back his fine. All his savings are gone.
The above-mentioned case study illustrates how hard earned retirement savings can be lost in a couple of hours, causing personal, financial, psychological and emotional damage.
How not to be next
If you’re thinking about how to invest your retirement savings, follow these ten steps to protect your pension:
1. Be wary of cold calls and unsolicited texts or emails
Scammers will often claim they’re from Pension Wise or other government backed bodies. These organisations would never phone or text to offer a pension review.
2. Check everything for yourself
People have fallen for scams because they’d been ‘recommended by a friend’. Do your homework, even if you consider yourself to be financially savvy – false confidence can lead to getting stung.
3. Make sure your adviser is on the Financial Conduct Authority (FCA) approved register
Pension scammers may pose as financial advisers. Check to make sure yours is FCA-registered at www.fca.org.uk/register.
4. Check the FCA’s list of known scams
Visit www.fca.org.uk/scamsmart to see if the deal you’re being offered is a known scam.
5. Steer clear of overseas investment ‘deals’
Well-known scam types include unregulated investment in a hotel, vineyard or other overseas opportunity, and where your money is all in one place – and therefore more at risk.
6. Don’t fall for ‘guaranteed’ returns or professional looking websites or brochures
You can never guarantee returns on an investment, and anyone can create a smart website or brochure these days. Question everything, however credible it sounds or looks.
7. Don’t be rushed into a decision
Scammers will try to pressure you with ‘time limited offers’ or send a courier to your door to wait while you sign documents. Take your time to make all the checks you need – even if this means turning down an ‘amazing’ deal.
8. If you’re aged 50 or over and have a DC (defined contribution) pension, talk to Pension Wise
Pension Wise is there to help you investigate your retirement options. Visit www.pensionwise.gov.uk for more information (and to check what kind of pension you have).
9. Ask The Pensions Advisory Service for help
You can call them on 0300 123 1047 or visit www.pensionsadvisoryservice.org.uk for free pensions advice and information.
10. Contact your provider and call Action Fraud if you think you’ve been scammed
If you’ve already signed something you’re now unsure about, call Action Fraud on 0300 123 2040 and contact your pension provider immediately. They may be able to stop a transfer that hasn’t taken place yet.
However, if a Jamati member would like to discuss their pensions or other personal finance related matters, they can reach out to Aga Khan Economic Planning Board for UK (AKEPB). Contact details of AKEPB board members can be found in the Institutional Directory.
