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We all like to think that we could spot a scam. But scammers are often sophisticated and it’s easier than you think to fall for their claims. The Financial Conduct Authority (FCA) has recently highlighted some of the most common tactics fraudsters use to try and get their hands on your pension with a quiz.

Falling victim to pension scammers can be devastating. Often it will mean losing a lifetime of savings and the financial security you’ve been working towards over your career. According to the FCA, the average victim will lose £82,000 as part of a pension scam, a sum that takes 22 years to save up. Whilst there is a chance that your savings will be recovered this often isn’t the case. Being targeted by a scammer could mean your retirement plans are left in tatters.

[Clicking on external links will take you away from the regulatory site of Bright Advice Ltd. Neither Bright Advice Ltd nor Quilter Financial Planning is responsible for the accuracy of the information contained within the linked site.]

Could you spot a pension scam?

Despite 63% of pension savers confident in their ability to spot a scam and protect their savings, a survey reveals that some are overconfident. The same portion would trust someone offering pension advice out of the blue, one of the red flags of a scam. What’s more, a fifth of people would be keen to take up an offer of accessing their pension, another clear sign of scammers.

Psychologist Honey Langcaster-James said, “Scammers employ clever techniques such as seeking to establish ‘social similarity’ by faking empathy and a friendly rapport with their victims. That can win your trust in a short space of time and by engaging with them you leave yourself vulnerable to losing a lot of money very quickly. People need to know how to spot the signs of a scam so they don’t fall for psychological tricks.”

Take the FCA quiz and find out how savvy you are at spotting pension scams.

7 pension scam red flags

1. Unsolicited contact

Being contacted out of the blue is one of the key warning signs of a scam. In early 2019, a pension cold calling ban was implemented. This means that reputable firms won’t contact you if you haven’t requested it or been in touch with them first. If any form of contact is unexpected, including text messages or emails, it’s best to ignore there. If you want to learn more about the offer, check the FCA register and contact the firm directly with the details listed.

2. An offer of a free pension review

Reviewing your pension seems like a sensible thing to do. Whether you want to review investments or understand the income it will generate at retirement, it can be tempting to seek professional help. However, ‘free pension review’ is a term that fraudsters often use. Ask yourself why valuable financial advice is free and be sure to check the credentials of any firm before handing over personal or sensitive information.

3. Claims of unlocking your pension early

Being able to access your pension early may sound appealing. But, unfortunately, it’s a sign of a scam. Most pensions become accessible from the age of 55 and to do so before will result in hefty penalties. Unlocking your pension early is only penalty-free in exceptional circumstances, such as following a terminal diagnosis. In these cases, you should contact your pension provider directly or speak to a trusted financial adviser that you’ve worked with in the past.

4. Pressured sales tactics

Scammers want to get their hands on your money as quickly as possible, leaving you little time to think through your decision. For this reason, they deploy high-pressure sales tactics. This may be offering time-limited offers or pressuring you into making a snap decision, such as saying a courier is bringing the paperwork to you immediately. Pension decisions can affect your security for the rest of your life. Don’t be pushed into making quick decisions and give yourself time to consider the implications.

5. Claims of low risk, high return investments

We all want our investments to deliver high returns with little risk of losing our capital. Sadly, this isn’t possible. All investments carry some level of risk and the higher the potential returns the greater this is. Claiming unrealistic returns or that your money will be ‘safe’ is a sure-fire way to spot a scam. Ask yourself why more people aren’t investing in these opportunities if they can guarantee high returns.

6. Unusual investments

Investing can be complex and if you’ve not taken control of investment decisions in the past, you may be unaware of how your pension has been invested. However, unusual or complex investments can be used to dupe pension holders. This may include overseas property or forestry firms. Before making investment decisions, it’s important you understand where your money will be going. Doing some research can help protect your savings.

7. Brush off your questions and concerns

Criminals will attempt to minimise or dismiss any concerns you might have about proceeding. If someone is failing to give you answers to questions, take a step back. A genuine pension adviser will understand that retirement decisions are important. They’ll want you to feel confident in the decisions you’re making and be happy to answer questions you have. They’ll also allow you to take a step back and think about further questions you may have before proceeding. In contrast, a scammer will aim to get you to make a quick decision without the space to think it through properly.

If you’re worried that pension scammers have targeted you, the first thing to do is contact your pension provider. They may be able to block withdrawals if they haven’t already been completed. You should also report the scam to the FCA through the Scam Smart website, as well as alerting Action Fraud.

[Clicking on external links will take you away from the regulatory site of Bright Advice Ltd. Neither Bright Advice Ltd nor Quilter Financial Planning is responsible for the accuracy of the information contained within the linked site.]