1.7 million younger savers vulnerable to ‘early access’ pension scams during Coronavirus crisis

Writer,

The UK National Cyber Security Centre have warned Coronavirus is the “top lure” currently being used by online criminals. One in 8 (16%) of people under 55 with a pension would consider an offer to access their fund early to help get them through the Covid-19 crisis. Younger savers are more at risk, with one in every five (21%) or 1.7 million* 18-34 year olds saying they would consider an offer to access their pension early, compared to just 13% of 35 – 54 year olds.**

The Covid-19 lockdown will inevitably push millions of people into a financially vulnerable position, with job losses, pay cuts and furloughing all potentially weighing on the nation’s finances.

In such an environment, it is inevitable scammers will look to take advantage by attempting to coerce savers to part with their hard-earned pensions.

A worryingly high proportion of under 55s admit they would consider an offer to access their pension early to help them get through the Covid-19 crisis. Younger people and men appear particularly vulnerable, with a fifth of each group saying they could be tempted by a pension early access offer.

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.

Cold-calling vulnerability remains

Despite the Government implementing a ban on pensions cold-calling and financial regulators launching a nationwide awareness-raising campaign, almost one in ten (8%) people would still consider accepting a call from someone they don’t know about their retirement pot, with a further 8% saying they may or may not.

Younger people appear more susceptible to this tactic, with 15% of the 18-34 age group admitting they would accept a cold-call about their pension and a further 18% saying they may or may not.

This apparent hubris about the dangers of scams leaves the door open to fraudsters to take advantage, particularly during a period of such extreme uncertainty.

Ultimately it is down to individual savers to get wise to scammers’ tactics and protect themselves so they don’t become the next victim.

Simple tips to avoid becoming a pension scam victim

  • 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
  • If you are contacted about your pension by someone you do not know, either by phone, email, text message or on social media, do not respond
  • Be extremely wary of anyone offering ‘free advice’, a ‘free pension review’ or ‘early access’ schemes. Advice is never free and you are not allowed to access your pension before age 55 unless you have serious health issues
  • If you are speaking to an adviser about your pension, make sure they are regulated and check their credentials out via the FCA register
  • 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.

*In a nationally representative survey of 2002 UK adults conducted by Opinium, 66 young people (aged 18-34) with a pension have said they would accept an offer to access their pension early. 66 / 2002 * 52,383,000 (UK adult population) = 1,726,912 or 1.7 million.
**Source: https://www.actionfraud.police.uk/news/public-embraces-email-reporting-service-created-after-spike-in-coronavirus-related-scams

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


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Written by:
Tom Selby

Tom Selby is a Senior Analyst at AJ Bell. He is a multi-award-winning former financial journalist specialising in pensions and retirement issues. Tom has over five years' experience working at Money Marketing magazine, where he became the Head of News in 2014. He has a degree in economics from Newcastle University.