Beware rise in pension scams as Coronavirus fraud reports surge 400%

While the country hunkers down in the hope of slowing the spread of Coronavirus, the economic fallout will inevitably lead to an increase in the number of vulnerable or potentially vulnerable people in the UK. In such an environment unscrupulous scammers will already be plotting ways to take advantage during what for many will be a time of serious financial strain. Fraudsters are already seeing an opportunity to prey on vulnerable people, with Action Fraud reporting a 400% increase in scams linked to Coronavirus in March.*

Scams claiming to allow people early access to their retirement pots could come back to the fore if we see a surge in unemployment placing immediate pressure on household incomes.

While getting access to your pension before age 55 may be tempting during this period of uncertainty, doing so will as a minimum see you hit with a 55% unauthorised payment charge from HMRC in the first instance.

At best you’ll then be subject to sky high fees by the fraudster as well, meaning you only get a fraction of your pension back and your retirement prospects are left in tatters. Many people lose everything as a result of these types of scams.

Onus on savers to protect themselves

Research published by the FCA and the Pensions Regulator last year** revealed almost half of UK adults aged 45-65 with a pension said they would take one or more actions that could expose them to common scam tactics.

Worryingly, 23% also admitted they would speak with a cold-caller about their pension plans – despite pensions cold-calling being made illegal in 2019.

Scammers’ tactics are evolving all the time and increasingly we see complex schemes promoted online through social media. This virtual Wild West is a natural home for fraudsters, with Governments around the world struggling to create meaningful protections for consumers. Everyone from the Police and regulators to providers and charities has a role to play in tackling pension scams. However, the best way to protect your pension is to arm yourself with the tools and knowledge to spot the tell-tale signs of a scam.

Five simple tips to avoid becoming a pension scam victim

1. Watch out for investment ‘opportunities’ that appear out of the blue and sound too good to be true. Schemes offering high guaranteed returns are often at the heart of pension and investment scams.
2. If you are contacted out of the blue about your pension by someone you do not know, either by phone, email, text message or on social media, do not respond.
3. Be extremely wary of anyone offering ‘free advice’, a ‘free pension review’ or ‘early access’ schemes. Advice is never free and you normally cannot access your pension before age 55 unless you have serious health issues.
4. If you are speaking to an adviser about your pension, make sure they are regulated and check their credentials out via the FCA register.
5. Don’t be rushed or pressured into making a decision about your pension – such tactics should set off a big red warning light in your mind and are often indicative of a scam.

To find out more about how to avoid pension scams, visit www.fca.org.uk/scamsmart.
Read more on Covid-19 scams on the FCA’s website.

*Source: https://www.actionfraud.police.uk/alert/coronavirus-related-fraud-reports-increase-by-400-in-march
**Source: https://www.fca.org.uk/news/press-releases/5m-pension-savers-could-put-retirement-savings-risk-scammers

These articles are for information purposes only and are not a personal recommendation or advice.