Pensioners have long faced the worry of not having enough money to fund their retirement but they now are up against a new rising threat as hundreds lose their life savings to fraudsters.
Millions was lost to pension scammers last year, with the average loss of each reported fraud coming in at £46,959, according to data from Action Fraud.
Experts have slammed the rise in fraud, claiming the current pension scams reporting system is “not fit for purpose” whilst others have called for reform.
Margaret Snowdon, chair of the Pension Scams Industry Group (PSIG), told i there is “no good or nationwide” reporting system in the UK.
“What we have is very ad hoc. There’s lot to be done to prevent pension scams from happening in the first place. There’s too much talk and too little action from the centre.”
Action Fraud figures show there were 559 reports of pension fraud last year, resulting in huge losses of £17,750,635.
It is not known how many people got some or all of their money back. The number is also likely much higher as a result of those who have not reported their losses.
Although pension scams have been flourishing for years, recent economic uncertainty and the cost of living crisis have made many individuals more susceptible to fraudulent offers promising quick financial gains.
Below we take a look at how pension scams work – and how you can help protect yourself against them.
How does a pension scam work?
There are several different types of pension scams.
They can come in various guises including free pension reviews, investment opportunities, pension transfer opportunities, or offers to help release money from your pension.
For example, a fraudster could ask for your personal information to review how well your current pension fund is performing or say they’ll help you access your pension pot before the age of 55 in exchange for a fee – but unless you’re seriously unwell or have a certain type of scheme, this isn’t possible.
Others might try to persuade you to cash in your pension – either the whole lot or a large sum – and hand the money to them to invest.
Pension liberation scams relates to those of any age who have a retirement fund, not just those who are already retired.
This type of fraud was at its height between 2010 and 2015, Ms Snowdon said, and then reduced because of pension freedoms and preventative action.
She added: “Pension freedoms made it easier to get access to pension savings and that spawned a whole new way of scamming people out of their money – through getting people to transfer from defined benefit (DB) to defined contribution (DC) schemes to get access to funds and to mislead people about investment returns and fees.”
The rise in social media and online advertising has also made it easier for scammers to get their message to victims.
Figures sent to i by Action Fraud shows a fall in the number of reports of pension fraud committed on pensioners (between the ages of 60 and 110) and pension liberation fraud in 2022/23. However, reports rose again in 2023/24. The same goes for financial losses.
The above figures don’t include investment fraud, which Jackie Stevens of The Pensions Regulator (TPR) said is also on the rise.
They also only include scam victims between the ages of 60 and 110. The figures are likely higher as anyone with retirement savings can be impacted by these crimes.
Knowing exactly how many people fall victim to pension scams a year is tricky as they often go underreported.
This could be due to embarrassment, or “because nothing is done for them,” Ms Snowdon said.
The charity is urging banks to do more to protect older customers as its research shows older people who have been scammed are losing an average of nearly £4,000 each.
The uptick in the number of pension scam reports and financial losses in 2023/24 could be caused by “complexity within the pension landscape,” Craig Rickman, personal finance editor at interactive investor said.
He added: “If people don’t understand how their pension works, and the options available to them, they’re easier to hoodwink.”
It could also be because there is more awareness and people know exactly what to do and who to report it to if they suspect they have been scammed.
How are so many scammers still getting away with it?
Jon Greer, head of retirement policy at wealth management company Quilter, said pension fraudsters too often get away with their crimes because they are difficult to investigate and prosecute.
He said: “Pension scams and other investment frauds are extremely complex, often spanning multiple jurisdictions, and can go uncovered for years before the victim realises their money is gone.
“This makes investigating these scams incredibly time-consuming and expensive, forcing the police to prioritise cases where they have a higher chance of success.”
Mr Greer also thinks that the legal deterrent is ineffective, warning that much more needs to be done to prevent scammers from operating before it’s too late.
‘I fell victim to scammers’
Mark, who wished to remain anonymous, told i he was one such person who fell victim to a pension scam.
He said: “I was given the ‘opportunity’ to maximise my future pension if I paid a small consulting fee every month to this company who would ‘watch my pension every day so you don’t have to’.
“I saw the company advertised on Youtube. I shared some pretty harmless information to begin with as I was cautious but then we exchanged email addresses as they said they needed that for their contact form and I thought that was reasonable.”
The scammers had fake client testimonials that they sent via WhatsApp as well as a “website”.
He paid for their services, hoping they would boost his pension pot by investing the money wisely.
Mark said the fraudsters would check in with him via phone call once at 8am or 9am and then again at 5 or 6pm to discuss their “progress” and how they were “helping” for that day.
“It all looked very professional in terms of their operation, they introduced themselves and then copied and pasted a lot of words about UK data protection and GDPR and how important it was that they could trust me and that I could trust them and how it was a ‘two-way street’.
“They then asked me for login details for my pension but I was a bit cautious about that too so said no.
“I discovered it was a scam when the individuals involved started putting pressure on me for more money and more money. WhatsApp would deactivate or block me and they said phone calls were ‘more secure’ which rose alarm bells for me.”
He eventually reported the service but still lost £250, paid to the scammers for their ‘work’ although he is grateful that ultimately it wasn’t more.
What needs to be done?
According to Ms Snowdon, who is helping to ensure the industry can spot scams on behalf of their customers through PSIG, here are some ways the government and regulators could take action:
- Stop bogus employers being set up through Companies House.
- Financial Conduct Authority (FCA) to regulate advisers more robustly and make it easier to identify which advisers are regulated and therefore which ones are not.
- FCA and other regulators to stop suspected scammers and to take down suspicious adverts immediately.
- Make it difficult for scammers and fraudsters to operate by resourcing intelligence and law enforcement as well as seizing assets and prosecuting.
- Provide victim support services to include financial and emotional support as well as an advocate service for victims.
- Stop victim blaming.
How can I protect myself from pension scams?
Here, Action Fraud lays out a few tips on how to protect yourself from fraudsters trying to get your pension.
Unsolicited communication about your pension: If you receive a call out of the blue (a cold call) about your pension, the safest thing to do is hang up. It’s illegal and probably a fraudster. If you get offers via email or text, you should simply ignore them.
Seek advice first: If you’re thinking about changing your pension arrangements, you should get financial advice beforehand. If you want to find an adviser, make sure they’re authorised by the FCA. Never take advice from the company that contacted you, this may be part of the scam.
Investment opportunities: Don’t be rushed into making an investment. Remember, legitimate organisations will never pressure you into investing on the spot.
Be mindful of tax implications: You’ll pay up to 55 per cent tax on payments from your pension provider if they make an “unauthorised payment”. This is a payment made outside of the Government’s tax rules and usually includes:
- Any payments before you’re 55
- A “trivial commutation” lump sum of over £30,000
- Regular payments into your account after you’ve died
What should I do if I’ve been a victim?
The first thing you should do is report it. If you’re worried about a potential scam, or think you may have been contacted by fraudster, report it to the FCA. Call them on 0800 111 6768 or use the contact form to get in touch.
If you have made a payment, inform your bank as soon as possible, they can help you prevent any further losses. Monitor your bank statements regularly for any unusual activity.
The Department for Work and Pensions (DWP) and the FCA have been contacted for comment.
Paul Sweeney, Pension Scams Action Group business lead at The Pensions Regulator (TPR), said: “The threat of scams and fraud is ever-evolving, as scammers think of new ways to target savers.
“To protect savers’ hard-earned pension pots, TPR leads the Pension Scams Action Group, a multi-agency taskforce bringing together government, industry, law enforcement and other agencies, including Action Fraud, the FCA and the National Fraud Intelligence Bureau, to stop scammers and prevent savers falling victim.
“Together we co-ordinate intelligence-gathering and target action to combat pension scams and fraud through education, prevention and enforcement.
“With dedicated resources now in place, we are currently enhancing PSAG’s intelligence-sharing capability and working more closely with a wider law enforcement network to tackle and disrupt pension scams effectively and decisively.”
A spokesperson from the Financial Ombudsman Service said: “A person’s pension is the cumulation of a lifetime of hard work and sacrifice and being the victim of a pension fraud or scam can be a life-changing experience, both financially and emotionally, for an individual and their loved ones.
“It’s important that people know the signs of potential fraud and scams and as a general rule, if something seems too good to be true, it probably is.
“People should be vigilant of fake websites, text messages from supposedly legitimate sources and scammers who make claims that seem suspicious.
“There is support out there for people who are scammed, and you can always approach our free, independent service to see how we can help you, should the worst happen.”
