Pensioners have lost some £1.8m to fraud since the start of the year, as scams targeting retirement savings are on the rise.
According to Action Fraud, the UK’s fraud reporting centre, there has been a 45% increase in reports of pension fraud since January, compared to the same period in 2020.
Over the past seven years, reports of pensions scams have steadily fallen, from nearly 1,800 in 2014 to just 358 last year. However, the latest data shows the trend of steady decline appears to be in reverse.
Savers may be tricked into risking their savings by scammers offering free pension reviews or investment opportunities that seem “too good to be true”, says the anti-fraud body.
Younger people may also be targeted with bogus offers to help them tap into their pension pot before age 55– the minimum age of withdrawal in the UK.
Head of Action Fraud, Pauline Smith, said that the true scale of the problem is likely to be even higher due to under-reporting and because people may not realise they have lost their savings until many years later.
We know pension fraud can have a devastating impact, both financially and emotionally, but any one of us can fall victim to fraud, and it’s nothing to feel ashamed or embarrassed about. It’s incredibly important that instances of pension fraud, and attempted scams, are reported to Action Fraud. Every report helps police get that bit closer to the people committing these awful crimes.
According to a report by the Police Foundation published in September, scammers often operate “in plain sight”, coming into contact with legal pension providers, imitating legitimate firms and wielding what may appear to be expert advice to make themselves appear more professional to their victims.
The report cited one scheme, which was staffed by a team of former professional financial advisers, who used their expertise to persuade savers to deposit pensions into the company’s scheme without disclosing their connection or considering whether it was the right investment for savers.
Other schemes were directly linked to organised crime and serious violence, effectively operating as a front in the UK and a means of raising capital and laundering money for the criminal networks behind them.
According to a survey by the Foundation, 70% of pension experts said that savers’ right to a pension transfer is partly to blame for the bout of criminality because it makes it hard to challenge savers, even when professionals raise concerns about their decisions.
At the moment, pension savers have a statutory right to transfer their pension, even if there are serious concerns about the legitimacy of the company they’re entrusting with their life savings.
For example, in 2016, Royal London was sued by one saver for attempting to block a suspicious transfer of savings.
In 2017, the government drafted legislation aimed at protecting consumers from suspicious offshore pension schemes by handing more powers to legitimate trustees. Still, the so-called Finance Act has not yet been passed.
FCA Director of Enforcement and Market Oversight Mark Steward warned savers always to check they are speaking to a regulated advisor before making a decision about their pension:
Scammers target people from all walks of life. It doesn’t matter the size of your pension pot; scammers destroy retirement dreams, so it’s vital that consumers know how to protect themselves from scammers. The best way to protect yourself is to know who you’re dealing with. Always check the FCA Register to make sure that the FCA authorises anyone offering you pension advice or any other financial service to perform the service they are providing for you and that the details they are providing are the same as those on the Register.
Unexpected and unsolicited offers, free pension reviews, promises of high returns which sound too good to be true and pressure to make a decision quickly are all warning signs of a scam. Use the tools on our ScamSmart website to protect yourself and your retirement.