23 Aug 2024

Millions are targeted by pension scammers

High level of pension scams leads to huge losses

Millions of people are at risk of being scammed out of their pension savings, according to new research from LV=.

Consumers are increasingly unable to spot scams as criminals become more sophisticated.

Read on to find out how people are at risk from scams, and for advice on spotting the warning signs of pension fraud.

7.3 million have encountered pension scammers

Pension rule changes over the course of the last decade have provided more opportunities for fraudsters looking to steal your retirement savings.

Criminals are attempting to take advantage of the greater flexibility. According to LV=, approximately one in seven – or 7.3 million – UK adults have been the subject of an attempted pension scam in the past 12 months.

These people were encouraged via unsolicited calls, texts and emails to transfer or release money from their pension.

The research was conducted as part of the LV= Wealth and Wellbeing Research Programme, a quarterly survey based on the responses of 4,000 people.

How much do people lose?

Separate data from the Pensions Management Institute (PMI) show that pensions and investment scams cost victims more than £2.6bn in the 2020-2023 period.

The data from the City of London Police’s National Fraud Intelligence Bureau revealed that there were almost 100,000 victims of pensions and investment fraud between 2020 and 2023, with victims typically losing an average of £26,773 to scammers.

Part of the problem is the proliferation of small pots. Around six million adults have multiple pension pots, which increases the complexity of managing retirement savings.

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Scams are becoming more difficult to spot

The LV= research also highlights how more people are succumbing to general financial fraud.

Overall, 6.9 million people were victims of fraud over the past 12 months, of which 3.8 million people lost money to a purchase scam.

Spotting scams is becoming more tricky. Over half of adults now say pension scams are harder to spot, and almost four in five (77%) say fraudsters have become more sophisticated with increasingly credible websites and other tools.

Fraudsters have several ways to snare you. Figures show that 42% of UK adults have received phishing scams in the past 12 months, just over a third (36%) have experienced a trusted organisation scam and around a quarter (24%) have experienced a refund scam.

Pension scams: spot the signs

Understanding the different types of pension and investment scams, and the tactics employed by fraudsters, can help you better protect yourself from becoming a victim:

Pension cold calls are illegal. Any unsolicited calls could be from a scammer. The same goes for emails, text messages or visits. A legitimate company won’t call you out of the blue.
Being forced to make a quick decision is a warning sign. Paperwork sent to your door by courier for a signature 'to speed things up' should ring alarm bells.
Beware promises of low risk/high returns. Fraudsters may promise high rates of return on your money, often including overseas investments. If it sounds too good to be true, it probably is.
Beware offers of a ‘free pension review’. Companies offering free reviews won’t be authorised. The investments pushed as part of a review will be dubious at best or an outright scam.
Avoid companies providing ‘help’ to release cash from your pension. You can only take money from your pension when you’re 55 or older, except in certain cases, such as poor health. A tax bill of 55% might await if you withdraw money before the age of 55, even if you didn’t realise you’d breached tax rules.
Contact information is important. If you have little or nothing in the way of contact names, addresses or phone numbers for the company you're dealing with, it might be a scam.

How to report a pension scam

When people are targeted, relatively few know what to do. Only 32% of UK adults know how to report a suspected scam. However, for those who are clients of financial advisers, this figure rises to 55%.

If you are a victim of fraud or suspect fraud, then you should report it to Action Fraud. They will be able to best assist you in your next steps and they can provide advice specific to your situation and the type of fraud you have been a victim of.

Getting your money back if you lose cash via a pension scam might take some time, but you usually have some protection.

You’ll be in a much better position if you dealt with a Financial Conduct Authority (FCA)-regulated adviser or pension provider.

If a regulated firm was involved, you can ask the Financial Ombudsman Service to investigate and decide whether you're eligible for compensation.

If the firm you used has since gone out of business, you can turn to the Financial Services Compensation Scheme (FSCS).