Many pensioners have been warned that pressure from the cost of living crisis could make them an easy target for scammers.
Such scammers often try to deceive vulnerable people to hand over large amounts or even all of their pension savings. Research from the City regulator suggests that the current financial struggle experienced throughout most of the UK is forcing pension-holders to be less careful with their savings.
According to the research, a quarter (25 per cent) of people surveyed said they would consider withdrawing their pension savings earlier than originally planned to help cover cost of living finances. The Financial Conduct Authority (FCA) warned that scammer use 'misdirection' tactics to deceive victims - such as promising them a better lifestyle in the future.
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If a consumer falls for one of these scams - and deals with an unauthorised firm - they will not be protected by the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS). The FCA surveyed more than 1,000 people aged 40 and over with workplace and private pensions.
It discovered that more than two-fifths (44 per cent) would take up the offer of a "free pension review" - this is despite the fact that such an offer is a tell-tale sign of a potential scam. Pension-holders may be made more vulnerable to these scams due to concerns about not having enough money to last throughout the whole of their retirement.
Scammers often attempt to reassure their victims by getting in touch out of nowhere and may even show them third-party verification to dispel fears of legitimacy. More than half (54 per cent) of those questioned by the FCA said they did not feel confident about how to grow their pension pot while 38 per cent did not feel confident in understanding how their pension actually worked.
According to retirement income market figures, the number of pension plans accessed for the first time in 2021/22 increased by 18 per cent in 2022. In many cases, the scammers that target pensioners can run off with all of their savings.
The FCA recalls one case in which a 58-year-old woman lost £45,000 in pension savings. At the time, she was looking after her terminally-ill mother when she received a text offering a better deal on her pension as well as some extra cash in return for transferring her pot.
“The scammers capitalised on my vulnerability and robbed me of the prospect of ever retiring," she said. “I was only trying to make my retirement easier but instead these scammers ruined my life. I still don’t know if I’m ever going to be able to get my savings back and will probably have to keep working until I am no longer fit to do so.
“I just hope I can help to raise awareness of the signs to look out for so that others never have to go through what I’ve had to deal with over the last nine years.”
Mark Steward, executive director of enforcement and market oversight, FCA, said: “The rising cost of living is affecting people at all savings levels, and pension scammers are taking advantage of this. Misdirection in this context means victims are lured in with the promise of a better lifestyle in retirement, or to support their living costs with pension savings.
“The scam then takes place right in front of their eyes, and it means thousands can be lost, for good. It’s important that consumers stay alert to these tricks, and visit ScamSmart to protect themselves before the sleight of hand can begin.”
Now, the FCA is urging people to the check the information of anyone attempting to discuss a change in pensions on the Scamsmart website. It also provides a warning list which helps to identify any firms which are actively running scams while also giving pension-holders the tools they need to identify a potential scam.
According to the FCA, these are some of the most common tactics a pension scammer will use:
- Offering a free pension review
- Being offered higher returns on a pension
- Being offered help to release cash from the pension - even if the holder is under 55
- High-pressure sales tactics - such as 'limited time offers'
- Unusual investments with unregulated and high risk
- Complicated investment structures where it's not clear where the money will go
- Arrangements with several parties - sometimes overseas - who take a fee
- Long-term pension investments - meaning it could take years before you realise something is wrong
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