5-minute guide to beating pension scams

Pension scams are increasing in the UK and with the changes introduced in April 2015 allowing you to cash in more of your pension, we’re likely to see fraudsters finding even more ways to target our retirement savings.

What sort of pension scams are there?

The most popular scam is pension liberation, with one-in-eight over-50s contacted by crooks, says Fidelity Worldwide Investment. You are told you can release more than 25 per cent of your pension as cash, or gain early access to your pension money before the age of 55. The scammers will contact you online, via text or cold call. The offers are fake and you could lose your savings.

If an offer appears too good to be true, it probably is

Will the new pension rules solve this?

We may see a decline in liberation scams – if you’re over-55 and have a defined-contribution pension, it’s your decision how you take the money (within limits). However, these scams are more likely to die down as a result of intervention from the financial watchdog, the FCA. In in doubt about a pension offer, contact the Pensions Regulator on 0845 600 7060.

What new scams should we watch out for?

Not so much scams but keep an eye out for people hoping to cash-in on the money you’ve freed from your pension. There’s likely to be more unregulated investment schemes promising huge guaranteed returns. “Recent ones include investing in overseas forestry and Middle East car parks and most involve property,” says Danny Cox at financial adviser Hargreaves Lansdown. “View anything promising a guaranteed return of more than 5 per cent with caution.”

How can I protect myself?

Don’t agree anything on the basis of an email or telephone call. “If an offer appears too good to be true, it probably is,” says fraud specialist John Milner from IBB solicitors. Always ask for things in writing and never give out your bank or pension details. If you have been cold called and suspect it was a scam report it to the Financial Conduct Authority using their online investment scams reporting form or by contacting their helpline on 0800 111 6768.

How else do I safeguard my pension?

Other than scams, the biggest risk to pensions will be the freedoms themselves. It will be easy to spend your pension too quickly and leave yourself with insufficient income for life. Most people who take their 25% tax-free cash from their pension fund at retirement. If you draw more than this it will be taxed depending upon your other income, so don’t draw too much.

Who should I trust?

Pension schemes are all regulated, however the investments within them don’t need to be, so only take advice from - and invest with - companies that are regulated and listed on the Financial Conduct Authority (FCA) register.

How can I be certain my pension will pay for life?

Recent studies show 70 per cent  of people want a guaranteed income and the only current solution to that is an annuity - an income for life. “For the majority, this is the best way to secure retirement income,” says Danny

I can’t decide what to do with my pension pot!

Take advantage of the Government’s new free guidance. Register at gov.uk/pensionwise. Read our guide to Pension Wise here.

What if I lose money to fraud?

If you have lost money to pension fraud report it to Action Fraud, the UK’s national fraud reporting centre by calling 0300 123 20 40 or by visiting Actionfraud. For more information on pension fraud, visit Get Safe Online.

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