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Pension scams: Staying vigilant in the cost-of-living crisis

December 2, 2022

As well as rising prices, there is another unwelcome trend on the increase throughout the cost-of-living crisis: pension scams.

The Financial Conduct Authority (FCA) has warned that fraudsters are preying on heightened money concerns amid a squeeze on household incomes, knowing that savers are increasingly turning to their pensions to cover increases in everyday living costs.

In 2021/22, the number of pension plans accessed for the first time rose by 18% and separate research from the regulator found that a quarter (25%) of consumers would consider withdrawing money from their pension earlier than planned to cover the cost of living.

As well as the opportunistic timing, the growth in scam activity also plays into a lack of confidence and knowledge around financial planning for later life, with cons designed to tap into underlying fears that many people have about whether their pension pot will be sufficient to sustain them through retirement.

In a typical scam, savers with access to their pension are asked to engage in a free review. This leads to a subsequent investment offer that promises to generate higher returns and boost their pension pot. Any third-party verification the scammer provides to enhance their credibility in the eyes of their victim is either falsified or meritless.

The FCA highlighted eight tactics that are commonly used to deceive people out of their retirement savings in these ‘misdirection’ scams:

  • The offer of a free pension review
  • The promise of higher returns on your pension savings
  • The offer of help to release cash from your pension even though you’re under 55 – something that is very rarely advised and has major tax implications
  • The use of high-pressure sales tactics, where scammers may reference ‘time-limited offers’ or even send a courier to wait while you sign documents
  • The use of unusual investments – which tend to be unregulated and high risk, and may be difficult to sell if you need access to your money
  • The involvement of complicated structures where it isn’t clear where your money will end up
  • The use of arrangements where several parties are involved, with some potentially based overseas and all taking a fee, which means the total amount deducted from your pension is significant
  • The inclusion of long-term pension investments, meaning it could be several years before you realise something is wrong

Understandably, pension scams are a cause for concern among a large section of the population, with research from Scottish Widows showing that more than a quarter (28%) of adults fear falling victim to such a con. The same study found that those fears were well-founded for 13% of respondents – the overall proportion who have been approached by pension fraudsters – and also the 5% of respondents who admitted they had successfully been tricked by such an approach.

Drilling into this figure further, there are variations according to geography and gender. For example, more than a third (35%) of Londoners say they have been targeted, making it the place in the UK with the highest scam risk. In addition, nearly a fifth (18%) of men had previously been targeted – more than twice the proportion of women (7%).

For anyone worried about getting stung by a pension scam, the FCA’s ScamSmart website contains a list of firms known to operate scams as well as a tool that highlights whether an offer is likely to put your savings at risk. Where fraudulent activity is suspected, individuals are advised to contact Action Fraud, which is the UK’s national reporting centre for fraud and cyber crime. It highlights four simple steps that can be followed to help protect against scams.

  1. Reject unexpected offers
    Question any contact out of the blue. Cold calls about your pension are illegal and should be reported to the Information Commissioner’s Office.
  2. Check who you’re dealing with
    Don’t trust claims that a company is FCA authorised – check the FCA Register and ensure it is permitted to give pension advice.
  3. Don’t be rushed or pressured
    Take your time to carry out the necessary checks and due diligence – and be prepared to decline an ‘unmissable’ offer with an urgent deadline attached.
  4. Get impartial information or advice
    Get independent guidance or advice before making any decisions or changes. The Pensions Advisory Service, Pension Wise and verified FCA-regulated advisors can all provide help.

The renowned US investor Walter Schloss famously spoke of how emotions such as fear can affect our judgement in financial matters. Today, with many people experiencing a degree of anxiety about money thanks to the rising cost of living, it’s little wonder that criminals are seeking to exploit those fears as a route to illegally extract pension savings.

Employers can help protect their workforce by raising awareness of the threat and encouraging them to stay vigilant. Being equipped with both the knowledge and the right tools allows individuals to respond rationally rather than emotionally if such a risk rears its head.


The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Corporate or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.