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Average pension scam loss doubles to more than £50,000

Vicky Shaw, PA Personal Finance Correspondent
·5-min read

Pension savers falling victim to scams are losing more than £50,000 on average – more than double the typical reported loss last year.

The average loss so far this year has been £50,949, according to complaints filed with Action Fraud – compared with £23,689 across 2020.

Looking at individual cases, losses ranged from under £1,000 to as much as £500,000.

Between January and May this year, reported pension scam losses totalled £2,241,774, according to Action Fraud figures. Many scams also go unreported.

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The Financial Conduct Authority (FCA) is urging pension savers to “flip the context” if they are approached online with tempting offers – and imagine how they would react if the offers had been made by a stranger in a pub.

Pension holders could be nine times more likely to accept advice from someone online than they would be from a stranger they had met in person, according to FCA research.

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.

They would also be five times as likely to be interested in a free pension review from a stranger online than someone in their local pub.

Some 1.9% of pension holders would be interested in a free pension review in their local pub. But 10.35% would be interested in a free pension review offered online.

The research also found that half (50%) of pension holders would be unlikely to make an impulse buy in retailer’s flash sales.

However, more than a third (36%) were unable to recognise “time-limited offers” as a sign of a pension scam.

Scammers will often try to tempt pension holders with time-limited offers that are too good to be true to pressure them into making a decision they will later regret.

More than a quarter of pension holders (28%) feel more at risk of a pension scam now compared to before the coronavirus pandemic, the survey also revealed.

Of those who feel more at risk, nearly two-thirds (65%) believe that scammers’ tactics have become more sophisticated and harder to spot during the pandemic.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “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, a psychologist who is supporting the ScamSmart campaign, said: “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?”

A Department for Work and Pensions spokesperson said: “Pension scammers are the lowest of the low, and with the growth in recent years of online scams we must act now to curb them.

“Our new pension transfer regulations will build a strong, first line of defence in the fight against pension fraud – helping stop these crooks from making off with people’s hard-earned savings.

“In recent years it has become clear online is the preferred operating environment for scammers and big tech also has a role to play in stopping them.”

Here are five common warning signs of a pension scam, according to the FCA:

1. Being offered a free pension review out of the blue.

2. Being offered guaranteed higher returns – claiming they can get you better returns on your pension savings.

3. Being offered to help to release cash from your pension, even though you are under 55.

4. High-pressure sales tactics – scammers may try to pressure you with “time-limited offers” or send a courier to your door to wait while you sign documents.

5. Unusual investments which tend to be unregulated and high-risk.

Pension savers can test how “scam smart” they are by taking a quiz on the ScamSmart website.

Visit fca.org.uk/scamsmart/how-avoid-pension-scams to find out more.