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Pension scams are on the rise. According to the Financial Conduct Authority (FCA), over £2 million has been lost to pension scammers in the last year, with victims, on average, losing out on £50,949. This number is double what it was in 2020. That said, small pots and big pots are being targeted, with victims being conned out of £1,000 to £500,000.

Of course, it’s incredibly worrying that such a nefarious scam has seen such an increase. Savers work hard their whole lives to make sure that they’re set for their golden days.

In response to this concerning trend, the government recently announced anti-pension scam plans to safeguard savers.

At The Salary Calculator, we’ll walk you through what the government’s Fraud Action Plan is, what it means for you and some steps you can take to protect yourself from pension scams.

This article will explain:

• Latest statistics from the FCA
• What the Fraud Action Plan contains
• Tips to protect yourself against fraud

A warning from the Financial Conduct Authority (FCA)

According to the FCA, pension scams have become increasingly common due to the pension freedoms introduced in 2015. This gave people much more flexibility around their investments; however, this flexibility also brought with it risk.

Now, the FCA says that pension holders were nine times more likely to accept pension advice from someone online than someone in person. Savers were also five times more likely to be attracted to a free online pension review by a stranger than one offered by a stranger in the pub. Worryingly, out of those surveyed, 28% were aware that this kind of offer was typically the sign of a scam.

As a result, Mark Steward, executive director of enforcement and market oversight at the FCA, suggests that pension holders should challenge themselves and “flip the context”. “Imagine a stranger in a pub offering free pension advice and then telling you to put those savings into something they were selling. It is difficult imagining anyone saying yes to that,” he said.

According to Tom Selby, senior analyst at AJ Bell, men aged 55 and over “who can access their retirement pot flexibly” are one of the main targets for this kind of scam. Of course, the current climate caused by Coronavirus has made people more vulnerable to pension scams too.

The Fraud Action Plan

The UK government recently admitted that it needs to do more to protect people from pension scams. So, it will soon publish its Fraud Action Plan 2022-2025, which will seek to bolster consumer protections by eliminating fraudulent infrastructure.

Reportedly, more emphasis will be placed on tackling ‘secondary scammers’ who go after those who have already been scammed, and the government will also pursue greater gathering and sharing of data relating to pension scams.

Tips to protect yourself

While you may think that you’re too savvy to be at risk of a pension scam, scammers are becoming increasingly sophisticated with the tactics they use to trap victims.

The FCA has warned that overconfidence on the part of consumers puts people at risk. So, it’s always best to make sure that you take some steps to safeguard yourself.

Look out for red flags – As outlined above, those offering free reviews are unlikely to be legitimate advisors, equally those who promise you ‘high returns’ are likely to be pulling a fast one.

Keep yourself informed – In line with the UK’s pension rules, you typically can’t unlock your pension until you’re 55. So, if you’re promised an early cash release, it’s likely that this is a scam. Get in touch with the Pensions Advisory Service if you have any questions or concerns. Pension Wise is another service that can help you stay in the loop.

Be wary of cold calls – Back in January 2019, the government banned cold calling regarding pensions. So, unless you have given your pension provider prior permission to call you, ignore calls and texts regarding your pension because those who get in touch are likely to be scammers.

Take your time – Those who pile on the pressure or give you a limited time offer will likely be scammers. It’s important to take the time to research a provider to make sure everything is above board. Always check the Financial Services Register before making a decision.