Pension scams are evolving

The theory of evolution states that evolution happens by natural selection.

Individuals with characteristics most suited to the environment are more likely to survive and reproduce so becoming dominant. As the environment has changed, our bodies would have changed to suit the Earth’s conditions.

Pension scams are evolving.

We are now seeing more legal scams. Either money is being transferred into legal pension wrappers, which then buy a legal but wholly unsuitable (and rather smelly) investment. Alternatively, where the customer is over age 55, the money is being transferred out of the pension and then buying, you guessed it, a legal but smelly investment.

The Pensions Advisory Service (TPAS) is part of the customer journey – customers should contact us if they are concerned that they may have been scammed. We ask whether the customer knew the organisation that had contacted them. Some customers feel that the approach could have come as a result of a PPI claim that they made or a survey that they completed. We had one customer who was working for a company that was closing one of its sites and she thought that she may have been targeted through LinkedIn. It is a fact that there is a huge amount of publicly available information now available about us and this makes us all targets for pension scam activity.

For some time, the pensions industry has been carrying out due diligence before transferring money out of a pension scheme. The feedback that we have received is that scammers are telling their potential victims that ‘your pension company will do everything it can to hang on to your money like saying that it is doing due diligence’. Hence when the provider gives this explanation to the customer, it creates credibility for the scammer and makes the customer even more determined to transfer.

A scam is a confidence trick that attempts to defraud a person after first gaining their confidence. It then exploits natural human characteristics such as credulity, naivety and desire to want more. Pensions are the perfect target for scammers as the customer has low confidence and understanding of their pension. The scam approach is often given credibility by linking it to a ‘government initiative’ to review your pension and the end destination is often ‘bricks and mortar’, which fits into the British love of property and desire to want more.

The ban on cold calling is welcomed but it will not stop pension scams, which are seen as rich pickings by the scammers and too easy a target. It is therefore essential that we all raise customer awareness on all scams but pensions in particular, where customer knowledge is so low. This can be done in a variety of ways, such as community groups, through social media or even in a neighbourhood watch group (as recently done by my colleague Jamie). The key messages are:

  • Spot the signs – Unsolicited phone calls, texts or emails from people claiming they’re from Pension Wise or other government-backed bodies are nearly always scams – if you’re unsure just hang up! Don’t be enticed by time limited offers and snazzy websites. Beware of exotic sounding investments that offer ‘guaranteed returns’ or ask you to invest all your money in one place.
  • Caution – If you’re thinking of cashing in your pension, investigate the details. Don’t trust an offer because your friend recommended it or it’s being described as an ‘amazing deal’.
  • Ask the experts – If in doubt, call TPAS for free pensions guidance. Scammers can pose as pension advisers, so check to make sure yours is registered on the Financial Conduct Authority’s (FCA) website. Also check the FCA’s list of known scams. If you think you’ve already been scammed, call Action Fraud. Also contact your pension provider immediately as they may be able to stop a transfer that hasn’t yet taken place.
  • Mind your money – Scammers will always come up with new ways to trick you. Stay vigilant, seek advice and mind your money.

Scammers are adapting to their new environment. Let’s make sure that we make customers aware.

Visit pension scams for a scam spotting tool and five-step guide to protecting your pension.

Michelle Cracknell
By Michelle Cracknell
Chief Executive, The Pensions Advisory Service