During the first year of pension freedoms, the sum lost to fraudsters was double the figure of the previous year. We offer 10 insights on current deceptions.
6 Double advisers
John Moret, a pension consultant, says investors should be wary if their pension transfer is managed by one adviser and investment by another. He adds: ‘Usually [in such cases] an unregulated adviser who is promoting a pension transfer is not authorised to do it, so they get an independent financial adviser (IFA) who is regulated to do it. The regulated adviser then walks away.’ The regulated IFA gets paid to do the transfer but subsequently hands over responsibility for the client. The unregulated adviser then invests the transferred pension money, leaving the investor unprotected if the investment goes bad.
7 Payment protection insurance
If you have received a payment protection insurance (PPI) refund via a claims management company, be wary if it offers to manage your pension, warns Cracknell. The websites of companies running scam transfers often offer other services such as PPI and road accident compensation, which should be a red flag to those approached.
Cracknell says one woman who called the TPAS advice line had been approached about a transfer by a company that had previously won her PPI compensation. ‘She received £200 back on her PPI and then they called her about pension transfers,’ explains Cracknell. ‘The company had already built up trust with the woman because they had delivered cash to her.’
8 Pension reviews
Con artists are using personal online information to target people. Cracknell has seen cases of individuals being offered fake pension reviews. Following a restructuring at one big insurance company, an employee was contacted by scammers – it is easy for them to target staff by using the networking site LinkedIn. Cracknell says: ‘The scammers told the person that their employer suggested they contact them about transferring their pension. The fraudsters had a valid reason for calling, so the pension review story wasn’t beyond the realm of possibility.’
9 Claims management
If being conned into transferring pension money into a rogue scheme isn’t bad enough, those who have already lost money are now being targeted by claims management companies.
Cracknell says one man who called TPAS had already lost his pension when he was called by a claims company. ‘He was contacted by a firm that said it could get his pension money back. He paid them £500 to do that, but it was a scam. The reality is that once a pension has been transferred and put into high-risk investments, it has gone. If the Pensions Regulator and the police can’t get money back, what makes anyone think a claims management company can?’
10 Cold calls
Cold-calling is pension scammers’ preferred way of operating. Citizens Advice reckons that 10 million consumers have received unsolicited contact about their pensions since April 2015, when pension freedoms were introduced. The government is to ban cold-calling, texting and emailing to try to stem the flow of pension scams. However, Cracknell warns: ‘The size of the prize means scammers will find alternative routes or keep cold-calling. Don’t assume when a ban is eventually in place that every call is bona fide.’
Telltale signs that you are being conned
New types of fraudulent schemes are emerging all the time as scammers try to stay a step ahead of potential victims, but common tell-tale signs can indicate when you’re being taken for a ride.
Martin Tilley at Dentons says if you are contacted about a pension transfer or a too-good-to-be-true investment, it pays to be suspicious. He adds: ‘If the investment is unregulated, take every “fact” to be a lie until it is proved true. You have to dig and ask questions about the investment. If they do not want to give answers, they will stop talking to you. For them, it’s a waste of their time and they will move on.’
Michelle Cracknell at The Pensions Advisory Service (TPAS) suggests that if you are unsure about an investment, do basic searches such as checking whether the company offering the investment is located in the UK. An o shore location does not automatically mean you are being scammed, but regulation and compensation schemes may differ. She recommends using the internet to do research on company directors. If they hold numerous directorships in a variety of companies, alarm bells should start ringing.
Scammers typically pressure their victims to make a decision very quickly so the victims don’t have time to do relevant research or check the legitimacy of an investment, so be suspicious if you are told you have to invest on the spot.
Investors can call TPAS and run an investment past the organisation before it is too late. Contact TPAS on 0300 123 1047 or visit pensionsadvisoryservice.org.uk.