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Pension scam strategies revealed - here are the most common tricks to watch out for

Common tactics used by fraudsters to con victims out of their pensions have been revealed by the financial watchdog. The alert comes as more people are withdrawing pension savings as a result of the cost of living crisis. Here's what you need to watch out for.

The Financial Conduct Authority (FCA) disclosed the list as part of a new 'ScamSmart' campaign, launched today, which intends to help people avoid pension scams. The FCA said that "just as with magic tricks" scammers are distracting victims with the promise of higher returns, "preying on money concerns, and building up trust".

See our Stop Scams guide for more tips on how to protect yourself and your cash.

Here are the most common pension scams, according to the FCA 

  • The offer of a free 'out of the blue' pension review, which the FCA calls a "classic distraction tactic".
  • Guarantees of higher returns on pension savings.
  • Promises to help release cash from your pension even though you’re under 55. This is highly likely to be a scam, and doing so has major tax implications.
  • High-pressure sales tactics, which may include trying to pressure you with time-limited offers or even sending a courier to your door to wait while you sign documents.
  • Uncommon investment opportunities, such as investing your pension money into gold or cryptocurrency - these to be unregulated and high risk, and may be difficult to sell if you need access to your money.
  • Complicated investments where it's not clear where your money will end up.
  • Arrangements where several different parties are involved (some of which may be based overseas) all taking a fee, meaning the deductions from your pension will be significant.
  • The offer of long-term pension investments – which mean it can be several years before you realise something is wrong.

Always remember, if the firm you're dealing with is not FCA authorised (see below for how to check), you will not be covered by the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS) if things go wrong.

How can I avoid being scammed?

There are many things you can try in order to minimise the risk of falling victim to a scam. Guidance from the FCA includes:

  • Reject unexpected offers. If you're contacted out of the blue about a pension opportunity, chances are it's high risk or a scam.

  • Check the FCA Register. Make sure that anyone offering you advice or other financial services is FCA authorised. You can also check the ScamSmart website, including the FCA's Warning List, before making any decisions about your pension. 

  • Don't be rushed or pressured. Take your time to make all the checks you need to make sure that a firm is genuine and an offer is good.

  • Get impartial information or advice. You should consider seeking financial guidance or advice before changing your pension arrangements. See our Financial Advice guide for help picking and paying for an IFA. 

If you think you've been a victim of fraud or if you suspect a fraudster has targeted you, contact crime reporting agency Action Fraud. You can call it on 0300 123 2040.

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