Incentives such as cold calls, exotic investments and early access to cash are putting 5 million pension savers at risk of fraud says the FCA and The Pensions Regulator.
The regulators say even those who consider themselves financially savvy are just as likely to be persuaded to part with their cash by falling for one of six common tactics used by pension scammers.
Research for the regulators suggests that 42 per cent of pension savers could be at risk of falling for at least one of these six common tactics.
The likelihood of being drawn into one or more scams increased to 60 per cent among those who said they were actively looking for ways to boost their retirement income.
The regulators have identified six key methods – pension cold calls, free pension reviews, claims of guaranteed high returns, exotic investments, time-limited offers and early access to cash before the age of 55 – that are being used to tempt savers into risking their retirement income.
Pension savers were tempted by offers of high returns in investments such as overseas property, renewable energy bonds, forestry, storage units or biofuels. However, exotic or unusual investments are high-risk and unlikely to be suitable for pension savings. Nearly a quarter – 23 per cent – of the 45-65-year-olds questioned said they would be likely to pursue these exotic opportunities if offered them.
Helping savers to access their pensions early also proved to be a persuasive scam tactic. Seventeen percent of 45-54-year-old pension savers said they would be interested in an offer from a company that claimed it could help them get early access to their pension. However, accessing your pension before 55 is likely to result in a large tax bill for the saver.
The research found23 per cent of all those surveyed said they would talk with a cold caller that wanted to discuss their pension plans, despite the government’s ban on pension cold-calls this January. Nearly a quarter said they would ask for website details, request further information or find out what they’re offering, even if the call came out of the blue.
Victims of pension fraud reported in 2018 that they had lost an average of £82,000.
This year’s ScamSmart campaign, designed to raise awareness of the risk of pension fraud, is currently running on TV, radio and online.
Guy Opperman, minister for pensions and financial inclusion says:“Pensions are one of the largest and most important investments we’ll ever make, and robbing someone of their retirement is nothing short of despicable.
“We know we can beat these callous crooks, because getting the message out there does work. Last year’s pension scams awareness campaign prevented hundreds of people from losing as much as £34 million, and I’m backing this year’s effort to be bigger and better as we build a generation of savvy savers.”
FCA director of enforcement and market oversivght Mark Steward says:“It doesn’t matter the size of your pension pot – scammers are after your savings. Get to know the warning signs, and before making any decision about your pension, be ScamSmart and check you are dealing with an FCA authorised firm.”
Nicola Parish, Executive Director of Frontline Regulation, TPR, said:
“Scammers don’t care who they prey on or how many lives they wreck. If you ignore the warning signs you put yourself at risk of losing your savings.
“Victims are left devastated by what has happened to them. Make sure neither you nor any of your loved ones have to go through that ordeal.”
Honey Langcaster-James, psychologist, says:“Most people are confident in their ability to avoid being scammed. We tend to assume that it would never happen to us because we think we’d notice something if it wasn’t right. But even the smartest and savviest among us can become victims of crimes and we do often have a ‘blind spot’. Sophisticated scammers take advantage of this and use powerful psychological techniques to build trust and rapport and ultimately to influence our behaviour.”
Pension savers can test how ScamSmart they are by taking a new quiz on the ScamSmart site at www.fca.org.uk/scamsmart.
PLSA policy lead, investment & stewardship Caroline Escott says:“We encourage trustees and administrators to get to grips with the recently revised code of practice from the Pensions Scams Industry Group (PSIG). We also reiterate our call on the Government to introduce a tailored authorisation regime as soon as possible – focusing on those schemes which present the greatest risk – such as single-member schemes – to give people confidence that their pension scheme is a legitimate home for their retirement savings.”