Steps to avoid pension release scams

Some firms’ offer schemes where pensioners are asked to invest in pension loan or liberation, which allows the investment firm to borrow money from your pension account. Money cannot be taken from pension account until you attain 55 years or are older, and those who are offering such deals are mostly offering a scam.  

Withdrawing money early can lead to tax deductions up to 55 per cent, or you can lose money from pension.  You have to pay tax for early withdrawal of pension, if the tax rules are broken, or even if the money withdrawn is again surrendered into the account.  Investment charges and other money involved in transaction may have to be paid.

How the scammers work?

The scam firm may organize meetings or seminars, where the benefits of such investment are discussed. They may contact through emails, word-of-mouth, exhibitions, etc. They mostly offer a free pension review and may advice you to take a loan from pension account even when you are below 55 years. They may call such withdrawal as loan from pension, a cash back or advance.

Mostly 50 per cent of the pension is taken as loan for investment by the firm at a specified fee which can be up to 30 per cent of the amount. This fee may not include tax and how the fee is charged is mostly not explained.  The fees do not include the tax, paid on the pension amount.

On paying the fee, the pension money is either invested in high risk investment schemes, or overseas property or it can be simply taken by the scammer, who promises to give huge returns through long term investment, and may disappear on contacting for returns after the term of investment (mentioned as duration)is completed.

How to prevent such scams?

Do not attend calls related to such deals. Do not answer the emails, advertisements, texts or posts related to such schemes. Ignore messages related to it.  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 the organization offering the deal is backed by FCA or is eligible to give advice on pension or not.  Check the list of registered companies with FCA – for pension review. In case, you suspect a scam, call consumer helpline (0800 111 6768) or register your case online.

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

Get alert if the investor claims to give huge money in returns or as profits, through pension related deals and ask the firm to give detail information related to risks and consequences of investing. These can be illegal schemes where the scammer may not explain about the tax consequences or related charges.

Get a reliable pension account review from a reputed advisor to pay debt using the pension money. Mostly taking money out of pension account leads to losses through taxes, interests, and it is very expensive in many ways.  

What to do if you have already withdrawn money?

The FOS may help in resolving the matter, if you inform them about the scam firm and ask for getting the money back.

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

Get advice from financial experts from a government authorised firm.

Check if the firm is registered with authorities. See reviews of scams and check the pension regulatory 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 consumer helpline or file a report with the government website.

Scammers may contact you again to sell new products, or as a follow up, or to discuss about money back options, or they may show interests in buying back the investment for a specified fee. If you believe them, you will again face losses, instead, contact government anti-fraud organization immediately.

Government offers measures to prevent such scams where the actions to prevent cold calls related to pension has been offered. The rules regularising such deals, fraudulent schemes and tough actions on money transfer from pension account has been offered by UK authorities to prevent frauds. There are plans to offer various other provisions to people who feel they are investing in fake schemes. You can check the provisions on authorised websites.

Do not answers emails or calls related to such deals and do not assume they are can be trusted even if the person calling knows a lot about your bank account or financial details.