Until recently, pension providers had wider powers to refuse to make a transfer if they had concerns about where it was going. This acted as a major line of defence in preventing pension scammers from accessing individual’s pensions and savings.
However earlier this year, the High Court overturned a Pensions Ombudsman decision that sided with Royal London who refused a suspicious £8,000 transfer to a small self-administered pension scheme (SSAS) in 2014. There is now serious concern as this ruling gives pension savers the right to transfer in certain circumstances, even where pension providers have reservations, opening the floodgates for scammers to prey on the unsuspecting.
Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice, discusses how employees could avoid losing their pension to scams and fraudsters;
“This ruling means that pension providers are now in a very difficult position as they no longer have the right to refuse certain transfers, even if they consider them a risk. Employees must be aware that there are scammers out there who will use legal loopholes like this as a means to an end, and individuals should therefore look out for the warning signs.
After all a recent study from Citizens Advice found that nearly 90% of people would fail to spot the common warning signs of a pensions scam.”
He adds, “The issue is that scams don’t looks like scams. They look and sound legitimate, with professional looking websites and literature, which is why people are hoodwinked. In our financial education seminars, adverts from organisations that are ‘too good to be true’ are shown to prove how hard they can be to spot.
Some scammers will approach it as an investment or business opportunity. For example, there have been recent reports of fraudsters targeting pension savers in a new scam offering opportunities to invest in parking spaces, promising attractive pay-outs which never come to fruition.”
Watts-Lay warns of the dangers, “Remember, if it looks too good to be true, it probably is. Legitimate investment companies are also very unlikely to cold call. The people that run pension scams are clever and often get hold of personal details not just about an individual, but their local area and interests. They are often very knowledgeable and incredibly friendly, which can catch even the savviest people off guard.
Genuine advisers and investment opportunities will never rush someone to make a decision. Employees should be very wary if documents are urgently couriered to them for signing and if they are being encouraged to take out a large lump sum, or to transfer their pension money quickly.”
He continues, “They should watch out for promises of being able to release their pension early, as they normally can only be accessed after age 55.
Scammers will also downplay the risks to an individual’s money and use confusing legal jargon, offering unusually high ‘guaranteed returns’. Scam buzz words for employees to be vigilant of include, ‘legal loophole’, ‘free’, ‘time limited’, ‘no risk’ and ‘one-off and unique investments’.”
Finally Watts-Lay concludes, “The most important rule employees should remember is that whatever investment they are planning to make, it is important to check that the company is registered with the Financial Conduct Authority (FCA) first at https://register.fca.org.uk/. If they aren’t listed then there will be no place to go if the investment turns out to be a scam. Also, employees could further protect themselves by checking the FCA’s list of known scammers at www.scamsmart.fca.org.uk before investing.”