A recent report has found that a quarter of pension transfer assessments carried out in the first three months of 2023 raised red flags for potential scams.
This comes on top of the news that Brits lost more than £177 million to impersonation scams in 2022, a figure seen as evidence of evolving – and increasingly successful – fraudster tactics.
Four years after the government banned pension cold-calling, and with news that the ban could soon be extended to all financial products, the risk of falling victim remains high.
It’s more important than ever to take professional advice before you make any big financial decisions and to understand the red flags you need to look out for.
A quarter of Q1 pension transfers were suspicious enough to warrant further investigation in 2023
There are many valid reasons why we might advise you to transfer your pension. Older plans might have higher charges or fewer fund choices. Some might be performing badly or we might be suggesting you consolidate your plans in the approach to retirement.
Scammers, though, are likely to list different benefits.
The recent Help & Advice report, published by Professional Adviser, confirms that of the suspicious transfers they identified:
- 17% advised a transfer could help clients attain higher investment returns
- 15% pressured clients into making a quick or risky decision
- 7% of clients under the age of 55 were told they could access their pension immediately.
During the same investigation, Help & Advice looked at all pension transfer scam assessments and found that the average risk of a transfer raising scam red flags across 2022 was 21%.
The cost of living crisis, the fallout from September 2022’s mini-Budget, and market volatility as a result of the war in Ukraine have all helped to make times hard for investors. These conditions are also perfect for scammers.
3 pension transfer scam red flags to look out for now
The scam red flags identified in the above report won’t always be easy to spot, but here are three key ones to look out for.
1. Offers that are too good to be true
Simply put, any offer that appears too good to be true is likely to be a scam. It is easy to offer lucrative returns and these may seem tempting in the current climate but scammers will have no intention of following up on their promises.
In the worst-case scenario, transferring money in the hope of realising huge returns will mean you are simply handing your money straight over to the fraudsters.
Even if the investment “opportunity” you are presented with actually exists, it is highly likely to be in a high-risk asset and possibly overseas. This could mean it falls outside of FCA regulations and won’t be subject to the same stringent checks. Your money also won’t be protected.
2. Time pressures intended to rush you into bad choices
Remember that pension cold-calling is banned.
If you receive a telephone call out of the blue about your pension or a pension opportunity elsewhere, hang up. This is true even if the caller purports to be from a known organisation or even your own provider.
If you receive suspicious offers via email, text, or even face-to-face, remember Red Flag #1 and also be aware of the intimidation tactics a scammer might use.
Once-in-a-lifetime offers or time-sensitive opportunities with imminent closing dates only exist for one reason: to rush you into making a hasty decision.
Your pension is a long-term investment that is intended to provide you with retirement income for 30 years or more. These aren’t decisions that you can take lightly.
Take your time to complete due diligence as you would with any other big decision. Check the company’s website and the FCA register and speak to us.
3. Offers to take your pension early
Strict HMRC rules dictate when you can and can’t withdraw pension benefits. The minimum retirement age is currently 55 (rising to 57 in 2028) and benefits can usually only be taken before this date on the grounds of ill health.
Pension liberation scammers, though, will tell you differently.
If you receive an offer to access your pension funds early, this is a scam. Not only could you lose all of your hard-earned retirement funds, but you could also be liable for an additional HMRC unauthorised payment charge, which could be up to 55% of the amount you are due to receive.
Visit the FCA’s ScamSmart page to find out about pension liberation and other retirement scams.
Get in touch
At Globe IFA, we can help you to put a long-term retirement plan in place that provides you with your chosen lifestyle after work.
It’s a long-term plan because there are no shortcuts, so stay vigilant for scam red flags and always speak to us before you make a decision that could have consequences for decades to come.
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you.
Please note
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
