With the cost of living impact deepening, the FCA has launched its latest ScamSmart campaign aimed at giving consumers the knowledge and tools to avoid pension scams.

The FCA commissioned research highlights that:-

• A quarter of consumers would withdraw pension savings to cover the cost of living, making them vulnerable to ‘misdirection’ scam tactics
• Just as with magic tricks, scammers are distracting victims with the promise of higher returns, preying on money concerns, and building up trust

The ScamSmart website includes a warning list that consumers should check before making any decision about their pension and help identify firms that are running scams.

New research from the FCA has found that a quarter (25%) of consumers would consider withdrawing money from their pension earlier than planned to cover the cost of living. This is supported by retirement income market data which showed that the number of pension plans accessed for the first time in 2021/22 increased by 18%. 17% of over 65s are still working because they can’t afford to retire on their current pension because they’re worried about having enough money to last through retirement. More than a third – 37% – are not confident they have enough in their pension to last their whole retirement.

Preying on money worries and lack of confidence in pension savings to last through retirement, the FCA is warning that scammers are using ‘misdirection’ tactics to con victims. If a consumer deals with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

The most commonly used tactics of pension scammers to be aware of include:

• The offer of a free pension review
• Higher returns, where they will guarantee they can get you better returns on your pension savings
• Help to release cash from your pension even though you’re under 55. An offer to release funds before age 55 is highly likely to be a scam, and has major tax implications
• High-pressure sales tactics, where the scammers may try to pressure you with ‘time-limited offers’ or even send a courier to your door to wait while you sign documents
• Unusual investments – which tend to be unregulated and high risk, and may be difficult to sell if you need access to your money
• Complicated structures where it isn’t clear where your money will end up
• Arrangements where there are several parties involved (some of which may be based overseas) all taking a fee, which means the total amount deducted from your pension is significant
• Long-term pension investments – which mean it could be several years before you realise something is wrong

“The rising cost of living is affecting people at all savings levels, and pension scammers are taking advantage of this,” said FCA executive director of enforcement and market oversight Mark Steward. “Pension scammers are tricking victims with false promises of a better lifestyle in retirement, more money to support a better life in hard times.”

Four simple steps to protect yourself from pension scams

1. Reject unexpected offers. If you’re contacted out of the blue about a pension opportunity, chances are it’s high risk or a scam.
2. Check who you’re dealing with. Check the Financial Services Register to make sure that anyone offering you advice or other financial services is FCA authorised.
3. Don’t be rushed or pressured. Take your time to make all the checks you need
4. Get impartial information or advice. Consider seeking financial guidance or advice before changing your pension arrangements.

If you have any concerns, or just want some advice or guidance, get in touch.