The Pensions Regulator estimates there is £2.5 trillion worth of pension wealth in the UK, making this a huge target for fraudsters, who will prey on vulnerable pension holders using the surging cost of living and this week’s interest rate rise to worm their way in. Sunday People reader Daphne James from Cardiff received a phone call last month from a caller who announced himself as being from “Pension Release”, a company that facilitates the immediate release of £10,000 from your pension to pay for every-day living items and costs. The promise of £10,000 came at just the right time for Daphne, as she was struggling with her bills, so she agreed to what was on offer. She was told that she needed to initially transfer her pension pot to them, following which she would receive the £10,000 within seven days. She was told the pension would then be transferred back to her within 30 days. At this stage Daphne was confused and contacted me, not to ask if it was a scam, but to ask for help with how the scheme worked. Of course, it was a scam, and thankfully Daphne had a narrow escape.
There are lots of pension scams doing the rounds and many will not be as fortunate as Daphne and will fall victim to one of them. The Pensions Regulator has highlighted seven of the most common pension scams savers should avoid.
- Investment fraud– misrepresenting high-risk or false investments to savers.
- Pension liberation– misleading savers into accessing their pension pots before the age of 55,which will leave you with a big tax bill – even if the money has already vanished in a scam – or potentially involves tax evasion.
- Scam pension schemes and providers – setting up schemes to deceive victims that either do not exist, or exist but are committing fraud.
- Clone firms– disguising scam schemes and providers as legitimate entities.
- Claims management companies– making cold calls to claim savers have been mis-sold a pension, then asking for an advance fee to take your claim on.
- Employer related investment (ERI)– breaching restrictions against employers diverting employees’ pension payments to invest inappropriately in their business, leading to losses for savers.
- High fees– imposing excessive fees through unnecessarily complex business structures.