Pension SCAMS – How To Protect Yourself From Fraudsters


In May 2017 the FT reported that ‘more than £42m has been lost to “pension liberation fraud” since April 2014’. It is probable this number is only a small proportion of the total as a significant amount of pension fraud goes unreported.

Pension liberation fraud includes an investment of pension funds into investments that do not exist or are unable to deliver the promised return on investment. Scammers often offer unusually high returns based on obscure investments (often overseas) like carbon credits, car parking, storage facilities, biofuels or commercial lending arrangements.

The pension freedoms (April 2015) allowed those with a defined contribution (DC) pensions greater access to their pension funds when they reached 55 years old. Some of those in defined benefit schemes, interested in the potential benefits of the pension reforms, have transferred (often significant) cash sums out of their pension schemes for reinvestment elsewhere. A significant amount of pension cash is therefore available for investment presenting an attractive target for pension scams and fraudsters.

The Pension SCAM toolkit

A Citizens Advice survey showed that cold calls were the preferred contact method for scammers, followed by email with text and other methods a long way behind. A worrying trend is an increase in Cybercrime (hacking) both at the level of the private individual and major financial services organisations

Scammers often prefer to steer their targets into investments that are difficult to understand. They tend to employ high pressure sales tactics to force a quick decision and often make offers that, they claim, only a select few are aware of. They normally offer returns that are significantly higher than long term industry averages and play down (or fail to mention at all) that every investment carries an element of risk. Any or all of these tactics should trigger a red flag.

Industry And Government Intervention

The financial services industry (led by the Financial Conduct Authority – FCA) has been trying to crack down on scammers and fraudulent investment schemes for some time. When trying to avoid a scam a first step should always be to check if the company making the offer is on the FCA register. The FCA website ScamSmart  is also a useful resource.

In principle, both cold calling and email marketing are controlled by various directives, codes of conducts and European regulations (The most important being the Privacy and Electronic Communications EC Directive Regulations). However, a quick look at the amount of SPAM in most Email inboxes will show how effective these regulations are in practice.

In the Autumn statement (Nov 16) Chancellor Philip Hammond launched a consultation on a ban on pension cold calling. However, the expected crackdown on cold calling and email marketing failed to materialise (perhaps allocated a back seat behind elections and Brexit negotiations) until it tentatively re-surfaced as a Government issue earlier this month.

In addition to a cold calling ban, the Government is also investigating further powers to allow pension companies powers to block pension transfers they consider as suspicious.

Perhaps the most positive step is the Government, Police and Financial Regulators working together to create Project Bloom. You can read more on the Government website here.

In Defence Of Legitimate Promotional Tactics

While it is important to take every reasonable step to avoid the scammers there are many professional financial services businesses in the marketplace offering a range of potentially valuable services. Those legitimate businesses may employ a number of perfectly valid promotional techniques to get their business known.

Few legitimate financial services businesses employ cold calling but email and telephone contact may be employed where a consumer has opted into communications from that business.

There is, however, an ongoing issue in the financial services marketplace with lead generator businesses. These businesses are not regulated and therefore not able to provide advice but often have websites that, at first sight, appear to be legitimate financial services businesses. If a consumer enters their details on a lead generator website those details are sold on. Unfortunately, some lead generator companies continue to cold call, some quite aggressively.

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