The Pensions Regulator, Financial Conduct Authority and the Money and Pensions Service (MaPS) have warned pension scheme trustees and savers of a potential increased risk from scammers.
The three bodies are all members of the Pension Scams Action Group, a multi-agency taskforce dedicated to keeping savers safe from scams.
While the three organisations have not yet seen evidence of an increase in pension scams, they explained that they wanted to act preventively given the concerns over cost of living crisis and interest rate rises.
They believe that scammers will seek to cash in on economic uncertainty.
TPR executive director of frontline regulation and pension scams action group spokesperson Nicola Parish said: “Scammers exploit uncertainty. And savers’ worries about their finances may make them more vulnerable to fraudsters’ common tactics.
“Scammers may pose as people or organisations savers trust.
“They may contact savers out-of-the blue to make promises that appear too good to be true – because they are.”
The regulators also raised concerns about the impact of recent economic turmoil, such as the extreme movements in gilt yields.
They warned it may prompt savers to incorrectly decide there is a risk to their retirement pots and make rushed decisions about their finances.
AJ Bell head of retirement policy Tom Selby said: “All of this uncertainty will inevitably have left people more vulnerable to scams and more at risk of making poor retirement decisions, such as withdrawing their entire pension pot in one go and potentially paying thousands of pounds in unnecessary income tax as a result.
“The reality was the post-mini-budget problems we witnessed, and the subsequent Bank of England intervention, were about preventing a ‘death spiral’ in UK government bond sales, rather than there being any direct or immediate threat to people’s pensions.
“The hedging instruments at the heart of the crisis were held by defined benefit (DB) schemes, meaning that the majority in defined contribution (DC) schemes were not directly affected.
“Even in the case of DB schemes with LDI exposure, provided the employer was not at risk of going bust, their pensions should still have been secure.
“It is vital as the dust settles on the LDI crisis that all parties involved in communicating the issue reflect on the unnecessary distress caused to people who thought their hard-earned pensions may not be safe.”
MaPS head of guidance services and customer protection strategy Charlotte Jackson called on savers to seek free guidance from the pension specialists at MoneyHelper before making any major decisions.
Common signs of a pension scam include:
- being contacted out of the blue
- phrases like ‘pension liberation’, ‘loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’
- guarantees of better returns
- help to release cash from a pension before the age of 55, with no mention of the HMRC tax bill that can arise
- high-pressure sales tactics – time-limited offers to get the best deal; using couriers to send documents, who wait until they’re signed
- unusual high-risk investments, which tend to be overseas, unregulated, with no consumer protections
- complicated investment structures
- fixed-term pension investments – which often mean people who transfer in do not realise something is wrong for several years
The Pension Scams Action Group also called on savers to be on guard against recovery room or secondary room schemes.
This happens when fraudsters approach people who have already been scammed and offer to help them get their money back in return for a fee.
Parish added: “Anyone who receives an unexpected call about their pension – even if the call appears to come from a trustworthy organisation – should hang up.
“Reputable callers are unlikely to call out of the blue and they won’t ask for money upfront to pay for their services.”
Pension scheme trustees have also been urged to remain vigilant to the risk of scams and suspicious transfer requests.
Trustees are asked to follow best practice in protecting savers from scams including warning savers of the heightened risk of pension and investment scams in times of uncertainty and providing some of the common signs of a scam.
