Steps to avoid pension release scams

Due to the increasing cost of living, pension savours are considering accessing the pension pot earlier than planned, and the overall value of money withdrawn from pension pots increased to over 22 per cent to £45bn in 2021-22, up from around £37bn in 2020-21. 

It has been found that at least 17 per cent of Britons over 65 continue to work because they cannot afford to retire on their current pension, and over 30 per cent are not confident that the money they will get after retirement will last their whole retirement and pension scams.

The FCA warned that scammers use misdirection methods to con victims out of their pension savings. 

Many bogus firms offer schemes where pensioners are asked to invest in pension loans or liberation, which allows the firms to borrow money from your pension account. 

In general, money should not be taken out from a pension account until you attain 55 years or older. Firms offering such deals offer a scam that wants people to access their pension pot cash and transfer the funds into the scammer account, so they may offer investment plans overseas or take fees for offering financial advice to plan your retirement money. 

They offer free pension reviews, and it has been observed that people don't hesitate to take up the offer of a free pension review, although it is a common trick criminals use to find ways to get the targets' money out of the pension savings. 

Mostly such firms offering pension review schemes contact you out of the blue and show some third-party verification or positive reviews from appraised individuals or institutions to get targets. They offer fake websites ad brochures for distraction and use pressure tactics to get an immediate response from unaware clients. 

So when you get a blue text message, call, email or letter by post asking to fill out forms or sign a deal for a free pension review, be alert, as it can be a scam. 
   
Unless you are facing a medical crisis or have a pension with protected pension age, you cannot withdraw funds from the pension account before 55. 

If you withdraw, it is categorised as an unauthorised payment. Such withdrawals trigger a sizeable tax and a fee from the pension provider, and the tax can be up to 55 per cent on any early payments. Pension providers often do not allow people to withdraw as you pay a huge penalty on your lifelong savings if you withdraw before time. 

How Do the Scammers Work?

The scam firm may organise meetings or seminars offering free pension reviews and financial schemes offering higher returns on pension savings. 

The crooks guarantee you can earn much higher from your pension savings, which can be tempting, but these tactics result in you parting with your pension. 

They use many methods to help you release cash from your pension pot even before you are 55, where you face huge tax implications. 

In contrast, scammers use high-pressure tactics to push you into investing in a time-limited offer, or they may send a courier to your door to get your signature on the contract documents.

They may contact through emails, word-of-mouth, exhibitions, etc. Either they offer a free pension review or may advise you to take a loan from a pension account even when you are below 55 years. 

You may be asked to pay a huge fee to make new investments where the pension money is placed in high-risk investment schemes or overseas property, or it can be taken by the scammer, who promises to give huge returns through long-term investment. 

Then they disappear on contacting for returns after the investment term (mentioned as duration) is completed.

There may be complicated investment structures, mostly unregulated, difficult-to-exit high-risk schemes, and you must ask questions to get a clearer idea of where your money will end up. There may be an arrangement where several parties are involved. 

Some may be based overseas like you are offered to invest in a hotel in the Caribbean with a limited-time offer, and for every transaction or plan, you pay a fee to all the parties involved, which will be deducted from your pension money. 

Most long-term pension investments block your money for several years before you even realise you have been scammed. 

How To Prevent Such Scams?

Pension scammers promise the victims higher retirement income and a better lifestyle and offer miracle schemes. Nevertheless, your money disappears in seconds once you transfer funds, and the consequences can be devastating.

Be alert – 

Do not answer emails or calls about such deals, and do not assume they can be trusted even if the person calling knows much about your bank account or financial details. 

Do not attend unknown calls related to free pension reviews, and do not answer emails, advertisements, texts or posts related to such schemes. Ignore messages from unsolicited addresses about a free pension review plan. 

Most professional services related to pension reviews are not offered free of cost, and if somebody is offering such a scheme, enquire about the company and the investors. See if FCA backs the organisation offering the deal or is eligible for pension advice. 

Check the list of registered companies with FCA – for pension review. Call the consumer helpline (0800 111 6768) or register your case online if you suspect a scam. 

Not investing through an FCA-authorised company reduces the chance of getting the lost money back as you do not have access to FOS or FSCS.

Be alert if the investor claims to give huge money in returns or as profits through pension-related deals, and if you are planning to invest, always ask questions. The firm must give detailed information about such schemes' risks and consequences. 

You must check if these are illegal schemes where the scammer may not explain the tax consequences or the third-party charges.

Get a reliable pension account review from a reputed advisor. Mostly taking money out of pension accounts leads to losses through taxes and interests, which can be very expensive and lead to loss of long-term savings.  

What To Do If You Have Already Withdrawn Money?

The FOS may help resolve the matter if you inform them about the scam firm and request them to get the money back.

If you have already withdrawn money, download and read the instructions in the leaflet – Protect your pension pot.

Get advice from financial experts from a government-authorised organisation.

Check if the firm is registered with authorities. See reviews of scams and check the regulatory pension government website to identify a scam.

One can find more details through Pension Wise, the Pension Advisory Service and the Money Advice Service.

If Already Scammed-

Contact the consumer helpline or file a report with a government website.

Scammers may contact you again to sell new products as a follow-up, where they may discuss money-back options or show interest in buying back your investment, offering an exit plan for a specified fee. 

If you accept, you will again face losses; instead, immediately report the matter to the government anti-fraud organisation.

The government imposed restrictions on cold calls for any such pension review plan. The UK authorities have introduced rules to regulate firms offering fraudulent schemes, and tough actions are taken against any related money transfers from pension accounts to prevent fraud. 

There are helplines for people who feel they are investing in fake schemes and want to enquire more about them.