The FCA claims 42% of UK residents saving for retirement are likely to be caught out by the six most common pension scams
Fraudsters are targeting retirement savings
More than five million people across the UK could fall victim to common pension scams, the Financial Conduct Authority (FCA) has warned.
Research cited by the UK financial watchdog — in partnership with The Pensions Regulator — suggests 42% of retirement savers face the risk of being caught out by at least one of six regular tactics used by fraudsters to access pension funds.
Last year, victims of pension fraud in the UK reported an average of £82,000 in lost savings, with 180 reports made to Action Fraud by those who said they had been affected by a scam.
Minister for pensions and financial inclusion Guy Opperman said: “Pensions are one of the largest and most important investments we’ll ever make, and robbing someone of their retirement is nothing short of despicable.
“We know we can beat these callous crooks, because getting the message out there does work.
“Last year’s pension scams awareness campaign prevented hundreds of people from losing as much as £34m, and I’m backing this year’s effort to be bigger and better as we build a generation of savvy savers.”
FCA identifies common pension scams in the UK
The FCA runs the “ScamSmart” public awareness campaign to boost vigilance against financial fraud across the UK, and last month launched a pension-focused series of TV adverts warning customers of the risks posed by scammers.
FCA executive director of enforcement and market oversight Mark Steward said: “It doesn’t matter the size of your pension pot — scammers are after your savings.
“Get to know the warning signs, and before making any decision about your pension check you are dealing with an FCA-authorised firm.”
Pension fraudsters tempt consumers with fake promises of boosting their retirement savings though high-risk investments in areas such as overseas property, renewable energy bonds, forestry, storage units or biofuels.
Offers of early access to pensions before the age of 55 were also a popular tactic used by crooks, with almost a quarter of people saying they would be interested in such a proposition.
Other common tricks identified by the financial watchdogs include cold calling, free pension reviews and time-limited offers.
People actively seeking to boost their retirement savings were shown to be most at risk — with the likelihood of being drawn into a scam rising to 60% among this group, compared to an average of 42% among regular pension savers.
TPR executive director of frontline regulation Nicola Parish added: “Scammers don’t care who they prey on or how many lives they wreck.
“If you ignore the warning signs you put yourself at risk of losing your savings.”
PensionBee boss says pension providers have a duty to raise awareness of scams
PensionBee has developed a tech-driven alternative to traditional pension products in the UK, recently announcing that it now manages more than £500m ($611m) in assets for its customers.
It has also managed to generate a lot of trust and goodwill among its customers, boasting a 98% customer retention rate and highly positive responses on Trustpilot.
CEO Romi Savova said: “This research suggests that consumers are seeking to move their pensions in an effort to increase their retirement savings, but are unknowingly gambling with their money.
“Part of the problem is how we define a pension scam, and often a lot of the things we see are legal, but bad for consumers.
“If the pensions industry really wants to be rid of scams once and for all we need tighter restrictions on the number of investment options available to consumers.
“Minimum standards of quality must be introduced so consumers are not unfairly disadvantaged. For example, it is misleading for regulated firms to sell unregulated products to consumers but this is common in the pensions industry.
“Pension providers must also play an important role in raising awareness and warning their customers where they cannot verify a pension scheme being transferred out to.
“We have a duty to protect all customers, but it’s incredibly important to support vulnerable people, because they are more susceptible to financial scams and other forms of consumer detriment.
“The reality is most pension customers will be vulnerable at some point in their lives because death, ill health, financial hardship and relationship changes impact everyone.
“As it stands, there is nothing pension providers can legally do to prevent a transfer to a legal scam, and they must honour the customer’s wishes even if they suspect that their actions are not in their best interests.”