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Q1081: Can you tell me about pension scams?

Your pension can be one of your most valuable assets and like anything valuable, it can become the target for illegal activities, scams and high risk investments.

Pensions scammers often target older people who have built up large amounts of money over the years, convincing them to move secure pension pots into fraudulent or extremely risky schemes. This can leave hard-working people with little or no chance to rebuild their pensions pots, causing them stress and financial hardship.

Scammers try to persuade pension savers to transfer their entire pension savings, or to release funds from it, by making attractive-sounding promises they have no intention of keeping. The pension money is often invested in unusual, high risk investments like:

  • overseas property and hotels
  • renewable energy bonds
  • forestry
  • parking
  • storage units

A pension scam can begin with unsolicited contact by phone, email or text from someone claiming to represent a financial services firm or Government body. The tactics used are becoming increasing sophisticated.

Here are a few simple signs to look out for, which include:

  • you are contacted out of the blue
  • you receive an offer that's too good to be true
  • offering you access to your pension before the age of 55
  • you are expected to invest in an unusual interest
  • you are asked to withdraw money first
  • you are told to act quickly for the best deal

If you transfer your pension savings into a scam, you run the very real risk of losing a significant, if not all of your pension savings, as well as facing high commission or arrangement fees.

Additionally, accessing your pension early is only allowed in very special circumstances, such as ill health. If you access and transfer your pension before the age of 55, this may classify as an 'unauthorised payment' from your pension fund. This may result in significant tax penalties and HMRC can impose a charge of up to 55% of the value of your pension.

Don't be rushed into making a decision or signing anything, a genuine adviser will not rush you. All pension savers are advised to check the Financial Services Register to make sure an adviser or company is registered before you agree to anything, see the link in related information.

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