Five steps to avoid pension fraud

Writer, Tom Selby
Tuesday, July 19, 2016 - 08:48

Fraudsters are, sadly, determined to get hold of your hard-earned cash in any way they can. And given that your pension could be the most valuable asset you own, it’s no surprise scammers have set their sights firmly on this pot of money.

The pension freedoms introduced in April 2015, while handing savers greater control over their retirement pots, have also attracted more crooks keen to line their own pockets. And with the Government still steadfastly refusing to ban the scourge of cold-calling, here are some simple steps you can take to ensure your savings don’t end up in the wrong hands.

1. Be suspicious of cold-calls or unsolicited texts or emails

I’m sure at some point you’ve been called out of the blue by someone claiming to offer an incredible investment opportunity for your pension. If this happens, hang up the phone immediately! Equally, don’t respond to text messages or emails from someone you don’t know claiming to hold the key to retirement nirvana. In all likelihood this will be a scammer phishing for victims, so whatever you do don’t take the bait.

2. Do not deal with unregulated ‘advisers’

While telephone, text and email remain the weapons of choice for the modern con artist, some continue to knock on doors, usually targeting older people they think are more likely to be vulnerable. So make sure you only deal with FCA-regulated advisers – this is particularly important as, if you are sold an investment by an unregulated individual, you won’t have recourse to compensation.

3. Be wary of overseas investments

Scammers often promise double-digit returns through exotic investments in far-flung locations. So if you’re told you can get 10% annual returns from a teak plantation in South American or a hotel room in Spain, tread carefully and do your due diligence. Often fraudsters will advertise investments in an asset that doesn’t exist or hasn’t yet been built, so don’t hand over your cash unless you’re 100% confident you’re being sold a genuine, bona fide investment.

4. Watch out for schemes offering ‘guaranteed’ returns

Nothing, and I mean nothing, is guaranteed when it comes to investments. The closest thing you’ll get are Government bonds and final salary pensions – ironically the very things scammers are often trying to part you from. So if a company you’ve never heard of says it can deliver GUARANTEED returns of any amount, don’t touch them with a barge pole.

5. Don’t rush to make a decision

If you are tempted to invest in something high risk or in a far flung location, that remains your right. But make sure it is also your decision and you aren’t coerced into doing something you might regret by a pushy salesman desperate to boost his own commission.

Talk of pension scams might put you off saving altogether but, if you follow these steps and make sure you invest through UK-regulated firms in assets you understand, there is no need to worry.

The UK market is highly regulated and features in-built protections designed to protect those who fall victim to misselling. Visit our security centre which contains more information on pension fraud and other investment scams.

Above all, use your loaf and remember – if it sounds too good to be true, it probably is.

ajbell_Tom_Selby's picture
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