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How to spot a pension scam

Updated 25 September 2020

5min read

Nick Green
Financial Journalist

Anyone with a pension pot could end up falling victim to pension fraud. You don’t have to be retired or even near retirement – scammers can target you at any age with attractive-sounding offers or investments and trick you into handing over your life savings. The chances of becoming a target are relatively small, but frauds are becoming more sophisticated and harder to spot, so it pays to be vigilant.

By being aware of the risks and taking simple precautions, you can protect yourself and your loved ones from these frauds and scams. Watch out for these warning signs.

Signs that it’s (probably) a pension scam

Somebody contacts you

Real advisers don’t hawk around for trade, so if it’s a cold call, text message or a knock at your door, it’s almost certainly a scam. A clever fraudster might claim to be returning your call, in the hope that you’ve recently contacted a legitimate service or adviser. Always check that an adviser is registered with the Financial Conduct Authority (FCA) or call 0800 111 6768, and call them yourself on the number given on the FCA’s website – not any number the cold caller gives you.

If you’ve been matched to an adviser using Unbiased, we will tell you to expect a call from that particular adviser, so you can make sure it is the right person.

A caller may also claim to be from a government service such as Pension Wise or the Department for Work and Pensions, or something with a similar sounding name. These government services will never call you first, so don’t be fooled.

They offer you access to your pension pot before age 55

This should be an easy one. Except in very special circumstances (e.g. you are in very poor health) you cannot access your pension before you reach 55. Therefore anyone offering this is asking you to break the law, so by definition they are already a criminal. Just say no. You could also report them to the FCA or to Action Fraud (see below).

This scam can take a number of different forms, so be on your guard against all of them. The scheme might be describe by terms similar to the following:

  • Early pension access (or release)
  • Pension liberation
  • Selling your pension
  • Pension loans
  • ‘Cashing in’ your pension

Whatever they call it, if it means you get any money from your pension before you’re 55, it’s a con. Simple as that. Even if you do end up getting some money out of your pot, it’s likely that the fraudster will get most of it.

Someone impersonates your bank or pension provider

A popular recent tactic is a call from someone pretending to be your bank or pension provider, telling you of a problem with your account that requires you to move your money elsewhere. How can you tell if they’re genuine? This is easy – just take their name, and say you’ll call them back via the official provider number. Do not call the number they give you – take the number from the bank or provider’s own website. Finally, before you call, make sure the first call is properly disconnected. To be really safe, call on a different phone.

If your caller says they are the adviser you found through Unbiased, their details should match the information in the email we send you – so you can be sure just by checking this email.

They try to hurry you into a decision

A classic trick by rogue traders everywhere is to say a deal is about to expire, so you have to get in quick. This is partly to make sure you don’t have time to hire a bona-fide adviser who could see through their bogus offer.

Beware of any form of pressure tactics, such as

  • claims of a ‘unique opportunity’
  • up-front cash payments (read: ‘bribes’)
  • offers like ‘the last place in our investment group need to be filled’
  • any attempts to make you feel foolish for not signing up
  • talk of company shares that are about to rocket in price (even if such an offer is genuine, it is a huge risk)

The real world of pensions and investments moves slowly, without such melodramatic deadlines. No genuine IFA will have any reason to rush you or pressure you into a decision, because you pay them to act in your best interests.

Couriers are involved

One notorious technique is to cold-call a potential victim, pressure them to sign up for a scheme, and then send round the papers to sign via a courier who does not know anything about the arrangement (and so cannot answer questions). Never sign anything you don’t fully understand or aren’t fully comfortable with. Search for an independent financial adviser to go through any paperwork in detail.

They are hard to contact

Make sure you have a full postal address and landline telephone number for them, and do your best to verify both are genuine. If all you have is a website, mobile number and/or PO box address, be very suspicious. It’s also a bad sign if you find it hard to call a firm back for any reason.

The scheme they are offering sounds convoluted or exclusive

Most genuine investments are surprisingly straightforward. If someone offers you surprisingly high returns, tax ‘loopholes’ or special overseas investments, be extremely wary. Similarly, don’t put all your eggs in one basket – a genuine adviser will always recommend diversifying your portfolio.

Any offer to allow you to access large amounts of your pension (above 25%) tax-free is a tax-avoidance scheme, and should be treated with the utmost suspicion. Everyone is entitled to take 25% of their pension pots tax-free, but any more than this will be either a convoluted scheme, or flat-out illegal, or both. It’s not worth the risk.

Beware also of anything involving overseas investments, holiday homes or property investment. Although these aren’t necessarily cons, a pension is an extremely good investment vehicle in itself, so you are unlikely to be better off elsewhere.

They use certain giveaway phrases

A scam will often be disguised under phrases such a ‘pension loans’, ‘upfront cash’, ‘one-off pension investments’ or ‘free pension reviews’. Genuine financial advisers do offer free pension checks – you can find them here. However, all advisers found through unbiased.co.uk are regulated by the FCA, so be sure to confirm your adviser is FCA regulated if you found them via any other source. Generally, avoid any offer that sounds too good to be true – you will almost certainly lose money, not gain it.

Finally, there is always the possibility of encountering a scam that no-one has seen before. You can find more anti-fraud tips at the UK Care Guide. The best protection against being caught out by a new fraud is only ever to use an FCA-regulated financial adviser whom you have engaged yourself.

The golden rule to follow

Do not accept pension advice from anyone except an independent financial adviser whom you have hired yourself, or who has been matched to you using Unbiased's secure system. Make sure they are legitimate, qualified and FCA-regulated, and that you are genuinely talking to them. Do some research into the firm and ask to see their qualifications. You can check these with the official bodies if you really want to be certain. Remember that advisers found through Unbiased are guaranteed to be FCA-regulated.

Never be tempted by cold calls or unsolicited contact of any kind. If they are contacting you out of the blue, they have much more to gain from it than you do.

What to do if you suspect a scam

If you think you have been the victim or the target of a scam, you can call the FCA free on 0800 111 6768. If you may have already lost money to a fraudster, contact Action Fraud on 0300 123 2040 or visit www.actionfraud.police.uk.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.