The Pensions Regulator (TPR), the UK regulator of workplace pension schemes, has warned people to look out for scammers as the cost of living may leave them more vulnerable. In its latest Scam Strategy (published August 2022), TPR sets out a new approach to tackling the “scourge of scammers” by:
- educating savers about the threat that scams present
- encouraging higher standards and preventing practices which lead to saver harm
- fighting fraud through the prevention, disruption, and punishment of criminality.
And with the regulator warning that scams tend to pose a greater risk to those struggling financially, there are fears that more and more people risk losing all, or part of their pensions, as the cost-of-living crisis continues.
What is a pension scam?
TPR defines pension scams as follows:
“The marketing of products and arrangements and successful or unsuccessful attempts by a party (the “scammer”) to:
- release funds from an HMRC-registered pension scheme, often resulting in a tax charge that is not anticipated by the member
- persuade individuals over the normal minimum pension age to flexibly access their pension savings in order to invest in inappropriate investments
- persuade individuals to transfer their pension savings in order to invest in inappropriate investments
where the scammer has misled the individual about the nature of, or risks attached to, the purported investment(s), or their appropriateness for that individual investor.”
TPR also highlights several types of pension scams to look out for:
Pension liberation
Where scammers mislead savers into accessing their pension pots under the age of 55, unaware that they will incur a tax charge or potentially engage in tax evasion.
Scam pension schemes and providers
Where schemes and providers are set up to deceive victims, which either don’t exist or exist but are committing fraud.
Clone firms
Where scam schemes and providers are disguised as legitimate entities.
Claims management companies
For example, where cold-callers claim savers have been mis-sold a pension and then ask for an advance fee to begin a claims process.
Employer related investment (ERI)
Breaches of ERI restrictions, where employers divert employees’ pension payments to invest inappropriately in their business leading to losses to savers.
High fees
Where savers are charged excessive fees, often layered through unnecessarily complex business structures.
Recovery room scams
Where fraudsters approach pension savers who have been scammed, offering to help them get their money back for an upfront fee.
TPR distinguishes between pension fraud (where there are potential criminal sanctions) and poor practices, which may also cause financial loss. However, the regulator accepts that, for victims, the losses suffered are often the same.
How to avoid pension scams
At KP Law, we know that scammers are becoming more and more convincing. Our Investment Fraud & Mis-selling team has seen many intelligent and savvy people fall victim to pension fraud, and we understand the financial and emotional damage this can cause.
A consumer champion law firm with extensive experience in this area, we help our clients get their money back. And while there are differences between pension fraud and poor practices, we help victims of investment and pension scams, fraud, negligence, and mis-selling to recover their losses.
We believe that one of the best ways to protect people from financial crime is to help ensure they don’t fall victim to scammers in the first place. And the more people know about investment fraud, the more likely they will spot it when something is “off”. As such, our lawyers have collated some top tips to protect you from pension scams.
Don’t be pressured into investing
Criminals use promises of discounts and early investment bonuses to pressure people into investing without doing the proper diligence. It can be tempting to invest quickly if you are scared that you might miss out on a great pension opportunity. Likewise, fraudsters know they must convince people to invest, so they often promise fantastic, guaranteed returns to get potential “investors” excited. A reputable organisation will never pressure you into investing.
Research. Research. Research
Don’t invest without researching a pension company or scheme first. This includes checking the Financial Conduct Authority’s (FCA) register to make sure the company and advisor are regulated. This gives you a level of protection if things go wrong. The FCA has also created a warning list to highlight the firms it knows are operating without its authorisation. However, the FCA does warn people that “Even if a firm isn’t on our list, it may still be a scam – firms change names and details all the time”.
Don’t believe everything you see
Scammers often create fake websites to make it appear as if you are investing with a regulated and reputable pension company. If in any doubt – and especially if an investment seems too good to be true – contact the company using its legitimate website (not the one the advert links to) to ensure it runs the scheme. Likewise, fake investments are often advertised on social media (and elsewhere) to trick unsuspecting victims. Be wary of fake reviews and endorsements that provide a false sense of security.
Beware of cold callers
If a pension advisor/scheme contacts you out of the blue – via a call, text, the post, or social media – the investment could be fraudulent. Scammers might try and convince you that they are calling in response to an interest you have shown elsewhere, so be vigilant.
Speak to an independent financial advisor
If you are investing a significant amount of money, it is always worth speaking to an independent financial advisor first. Do not use any advisor suggested by the pension firm/scheme you are considering investing in.
Getting financial advice does not guarantee you won’t fall victim to pension fraud. At KP Law, we have clients who have used UK-regulated financial advisors and have still received negligent or criminal advice. However, if you use a UK-regulated advisor, you can seek compensation if something goes wrong.
Get your money back after pension fraud
At KP Law, we help people affected by investment and pension fraud get their money back. Providing a cool head in a crisis, we remove the burden from your shoulders as we fight for justice. What’s more, because we offer no-win, no-fee funding arrangements, you benefit from expert legal support and complete peace of mind without having to worry about costs.
Our solicitors have even won cases where victims had been told that there was little to no chance of compensation.
Contact us in confidence to find out how we can help.
