Scam victims have lost an average of £50,000 each, more than double last year’s figure, as the toll of recorded pension scams hits £2m in the first five months of the year, according to FCA data.
Research from the regulator found pension holders were nine times more likely to accept advice from someone online than they would from a stranger met in person. They are five times as likely to be interested in a free pension review from a stranger online than someone in their local pub.
Whether these approaches are made online or at the bar, free pension reviews, time-limited offers and help to release cash from a pension are all signs of a scam. ‘Flipping the context’ by putting these signs in an everyday, offline setting makes pension scams easier to spot and avoid, says the FCA.
More than two-thirds – 68 per cent – of pension holders claimed they were confident they could spot the signs of a scam – but only 28 per cent realised a ‘free pension review’ offer was a classic scam indicator
Experts say that the £2m figure is only a fraction of the actual amount that has been lost.
FCA executive director of enforcement and market oversight Mark Steward says: “Imagine a stranger in a pub offering free pension advice and then telling you to put those savings into something they were selling. It is difficult imagining anyone saying yes to that.
“It’s no different online. Whether you’re on social media or checking your emails, if someone offers you free pension advice, ‘flip the context’ and imagine them doing the same thing in real life. Stop and think how you would react.
“Fraudsters will seek out every opportunity to exploit innocent people, no matter how much they have saved.
“Check the status of a firm before making a financial decision about your pension by visiting the FCA register. Make sure you only get advice from a firm authorised by the FCA to provide advice, before making any changes to your pension arrangements.”
Dr Linda Papadopoulos, psychologist who is supporting the ScamSmart campaign says: “Scammers will use behavioural tactics to trick you into a false sense of security. Often these criminals will manipulate and persuade you to do things in the moment, which ordinarily you would feel suspicious of in a more familiar setting, such as a shop or local pub.
“It is important when approached with a financial offer on your pension, to take yourself out of the context or pressure of that moment. We know that people wouldn’t accept a free financial product in a pub or would be unlikely to make a purchase in a random flash sale – so why risk it with your pension?”
TPR executive director of frontline regulation Nicola Parish says: “These latest figures showing average losses to pension scams have doubled to £50,000 per victim are a shocking reminder of the threat to savers from unscrupulous criminals.
“Scheme trustees, administrators and providers have a vital role to play to beat crooks who prey on savers. That’s why we are calling on all those who run pension schemes to sign up to our Pledge to Combat Scams campaign. More than 200 have signed up so far, but we need more to take action now, and always report suspected scams to Action Fraud or by calling 101 in Scotland.
“Savers considering what to do with their pension pots should take advantage of all the guidance available to protect themselves, such as on the ScamSmart website and the new MoneyHelper website – a free online resource run by The Money and Pensions Service bringing together Pension Wise and The Pensions Advisory Service.”
AJ Bell senior analyst Tom Selby says: “It is shocking that £2 million has been lost to pension scams so far this year but in reality this is the tip of the iceberg. Most scams occur outside of pensions nowadays, with retirement savers over age 55 who can access their retirement pot flexibly one of the prime targets for fraudsters.
“We also know that the Coronavirus pandemic has led to an increase in vulnerability, with more than 27 million adults in the UK demonstrating characteristics of vulnerability such as poor health, negative life events, low financial resilience or low capability.
“Depressing as it is, scammers prey on this vulnerability to try to fleece people out of their hard-earned retirement savings.
“While steps have been taken to protect pension savers, Government and regulatory interventions can only do so much. It is vital individuals take responsibility, be careful before parting with their money and take the time to know the tell-tale signs of a scam.”