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How to spot a pension scam

Savings and investment concept, pink piggy bank with calculator on pile or economic analysis report chart and graph on office table.
New government rules expected by the end of this year could bring in an extra level of protection for those targeted by pension scammers. Photo: Getty (boonchai wedmakawand via Getty Images)

While the majority of Brits know the classic signs of a pension scam, some might not easily recognise additional and more creative ways fraudsters seek to con people.

The UK government's pension reforms have given over-55s the freedom to cash in their personal and company pension pots since April 2015.

With people having more options and control over their retirement money, the chances of falling victim to a scam are also higher.

Analysis by Hargreaves Lansdown (HL.L) found 85% of people know a cold call offering a "pensions review" is likely to be a scam, while 87% know to avoid instructions to act fast to take advantage of an opportunity.


However, only one in four (25%) can recognise when guaranteed returns on offer are too good to be true, anything offering 3% or more in the current market. 28% said they would have to be offered guaranteed returns of 10% or more to think something was a scam.

"We’re often told to beware of things that are too good to be true. The trouble is that most of us can’t tell whether an offer is reasonable and genuine, or wildly unlikely," said HL personal finance analyst, Sarah Coles.

Some £1.8m ($2.6m) has already been lost to pension fraud this year, according to the UK’s scams reporting centre. Action Fraud said in April it received 107 reports of pension fraud received in the first three months of 2021 — an increase of almost 45% compared with the same period in 2020.

New government rules expected by the end of this year could bring in an extra level of protection for those targeted by pension scammers.

Here are some additional red flags you should look out for in the meantime:

Cold calls

Being contacted out of the blue should always ring alarm bells, especially when it comes to your pension.

It is illegal for anyone but your own pension provider or a Financial Conduct Authority (FCA) authorised company to cold call you about your pension.

Early access to your pension pot

People should be worried about being offered early access to their retirement money — before the age of 55 — without any warnings about the consequences.

Look out for any companies or individuals that offer you early access but don't warn you about the hefty tax penalties you can face for doing so.

Anyone accessing their pension early will have to pay this, and the bill will fall to you rather than the scammer.

Watch: How to prevent getting into debt

Shady contact details and websites

It is recommended to to check the FCA's website to make sure a pension provider is registered with them, even if the company website or representatives say they are regulated by the UK's financial watchdog.

You should also be worried if a company or individual does not allow you to phone or email them back on contact details you already have for them or instruct you to wait for them to contact you again.

"This could be a clone firms, where a scammer claims to be a big reputable company. Some of these are pretty sophisticated, and they have fake websites and fake call centres," Coles said.

The investment feels familiar and complicated structures

Be aware of any investments that feel familiar and complex.

People may be confused by complicated investment structures, and be foxed by convincing scammers who try not to clearly explain what they're getting into, and ask them to just sign on the dotted line.

"If the structure is too complex to understand, there’s a much higher risk you are being conned," Coles says. "And even if the scheme works in theory, in practice each time your money moves you’ll pay handsomely for the privilege."

Read more: FCA warns over rising scams as fake investment firms steal £78m

Coles added: 'Scammers know that for many pension savers, investing in shares seems a bit removed from the rest of your life.

"They persuade you to switch into what’s actually a far riskier and more esoteric scheme (which may not actually exist or may come with exorbitant charges) but is already part of your life — like hotel rooms or car parks."

Watch: Regulators target football fans in campaign to stop pension scams worth millions

Changes in the pension sector

The UK government is poised to overhaul the pension sector, brining in new protections for pension savers.

"The positive news is that the government has consulted on introducing a new level of protection, which could be in place by the end of the year," Coles said.

Currently, if you’re taken in by a scammer and ask your current pension scheme to move your money, they can warn you it’s a scam, but you can often still insist you want to move anyway.

Under the new rules, schemes would have the power to block transfers to out-and-out scams that raised a red flag.

Those that raise an amber flag could be referred to the Money and Pensions service, so an independent person can explain the possible scam risk.