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10 Jul 2021

Pension scam average losses more than double in a year: how to protect your savings

The average victim lost a staggering £50,949

More than £2m has reportedly been lost to pension scammers since the start of 2021, with average losses more than doubling from last year, new research from the Financial Conduct Authority (FCA) reveals.

The data - provided by Action Fraud - shows that the average loss was £50,949 to May 2021, compared with last year's average of £23,689.

Individual losses reported ranged from just under £1,000 to as much as £500,000. The total lost during 2021 could be higher than £2m as many scams 'often go unreported', the FCA says.

In its latest call to protect the public, the FCA is urging pension savers to 'flip the context' if they're approached online regarding their pension, by imagining receiving the same approach about their pensions online as while having a drink at the pub to make scams easier to spot.

Here, Which? provides tips on how to spot a pension scam, how to report one if you or someone you know has been affected and looks at how regulators are combating such scams.

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Why do fraudsters target pension savers?

Since the pension freedoms were introduced in April 2015, over-55s have been able to withdraw cash flexibly from their company and personal pensions.

This means there's more potential for access to millions of pounds which weren't previously available.

Pension scams are not a new thing. But they are likely to be more prevalent now people have more options available to them when it comes to investing or spending their money.

According to the FCA and The Pensions Regulator (TPR), men in their fifties have been targeted most often, which could be because they may be keen to extend their investments before retirement and may have bigger pension pots.

Fraudsters promise high returns and low risk but, in reality, pension savers who are scammed can be left with no money left for their golden years.

How can I spot a pension scam?

Fraudsters are using increasingly sophisticated ways to con people out of their money. With the internet and advances in digital communications, these kinds of scams are getting more common and harder to identify.

FCA research shows that savers are significantly more likely to be fooled by scammers' tactics online than they would face to face.

The regulator found that just 1.1% of pension holders would take advice from a stranger, but 9.95% would accept financial advice such as a 'free pension review' online.

If you spot the warning signs in time, you can protect yourself from falling victim to a pension scam.

We present some things to looks out for below.

Ultimately, there are heaps of ways scammers could target you. To find out other potential ways you could be targeted, check our our guide on how to spot a pension scam.

Four ways you can protect yourself from a pension scam

The FCA and TPR recommend four simple steps to protect yourself from pension scams:

  • Don't be rushed or pressured into making any decision about your pension.
  • Reject unexpected pension offers, whether made online, on social media or over the phone.
  • Check who you're dealing with before changing your pension arrangements - check the Financial Services Register or call the FCA helpline on 0800 111 6768 to see whether the firm you are dealing with is authorised by the FCA.
  • Consider getting impartial information and advice - before you sign anything, you can also call government-backed Money Helper, which launched on 30th June, replacingThe Pensions Advisory Service, on 0800 011 3797.

If you think you or someone you know may have fallen victim to a scam, you can report it to Action Fraud on 0300 123 2040.

How are UK regulators combating pension scams?

The FCA and TPR have been trying to tackle pension scams for some time.

Both regulators are members of Project Bloom, which was created in 2012 and brings together government departments, agencies, regulators, law enforcement bodies and representatives of the pension industry to tackle pension scams.

The pair also joined forces in 2018 and launched a ScamSmart website to give consumers tips on how to spot the techniques used by fraudsters. The website also hosts the FCA warning list, which includes firms and individuals it knows are operating without its authorisation.

The web tool helps members of the public search this list, find out more about the risks associated with an investment or pension opportunity and the steps they can take to avoid scams.

Pension cold calling has been illegal since 2019. Firms that break the rules could face penalties of up to £500,000 - although, this doesn't necessarily mean they can't slip through the net, so be wary.

No legitimate pension or investment firm will ever cold call you about releasing cash from your pension, accessing it before you are 55 or extra tax savings, so alarm bells should ring if they do.

Sign our petition for better pensions

Pension reforms mean that people have more options than ever before on how to use their pension pot.

The Which? Better Pensions campaign is calling for action to make sure everyone can benefit from the freedom and choices available to them.

We want the government to deliver a fully functioning pensions dashboard and the FCA to introduce better safeguards and protections for pension savers when they reach retirement.