Is your pension safe from scammers?

The average amount of money stolen from pensions by fraudsters in 2021 is £50,949 - more than double what they took last year.

That’s according to the Action Fraud, which found individual losses ranged between just under £1,000 up to £500,000.

With scammers increasingly sophisticated in their approach, it’s more important than ever to be vigilant.

Warning signs to watch out for

The regulator Financial Conduct Authority (FCA) says there are some clear signs that you’ve been contacted by scammers.

First up, anyone cold calling about pensions will not be legitimate. In fact it’s been illegal since 2019.  So avoid anything like this straight off the bat. And treat unsolicited letters and emails or contact via social media in the same way.

The same goes for anyone offering a free pension review, something that’s increasingly common in online advertising. Even though most people would ignore a stranger offering to do this, almost 10% would accept this review when contacted out of the blue online. Yet this is just the scammer’s first step to stealing your money.

It could be they’ll just use this to get details like account numbers and passwords, or it could lead to offering dodgy advice that’ll convince you to give them your pension cash.

Next, and it’s something that applies to any kind of scam, but if it seems too good to be true then it probably is. With pension scams this is likely to be the offer of higher guaranteed returns than what you currently are getting from your pension savings. Often it can also involve an unusual investment in something that’s not regulated such as overseas property or renewable energy bonds.

Another common promise and massive warning that this isn’t a legitimate company is if they say they can release money from your pension earlier than 55 years old (or 57 from 2028). The scammer will talk about loopholes or loans, but if you do this you’ll get hit with a huge tax bill, or worse still lose it all.

Be wary too of anything which seems incredibly complicated or involves a lot of different companies. This could hide extra fees or lock your money away for longer than normal.

Scammers will also try to put you under pressure to make a decision fast, telling you that If you don’t act now you’ll “miss out on the opportunity”. Yet it’s all a tactic to rush you into making a decision without properly thinking about what is actually happening to your cash.

Other high-pressure actions the scammers could use include sending a courier to deliver documents and then wait for you to sign them.

It’s far better to miss out on something than agree to a deal on something you’re not sure about.

And if you do think it’s something worth pursuing, you should get independent advice. There’s also more information about pensions available from the government’s MoneyHelper site.

How to know if a firm is legitimate

The FCA register is available online at register.fca.org.uk or by calling 0800 111 6768. This lists all regulated financial firms and what they are allowed to offer advice on.

Check whether the people you are talking to are on this list. But even if they are on there, don’t assume everything is fine.

If you were contacted first it could easily be someone impersonating a legitimate company. Don’t use any contact details cold callers provide. Instead go direct to the firm via a number you find on their website.

What if you think you’ve been scammed?

If money has already changed hands or you’ve given potential scammers access to your accounts get in touch with your pension provider as soon as possible.

You can also get in touch with the FCA’s Scam Smart team (via the number above) and Action Fraud on 0300 123 2040 or online.

Read more: Could running an AirBnB work for you?

Read more: How to help your kids buy a home

Keep up with the top stories from Reader's Digest by subscribing to our weekly newsletter