No matter how financially savvy you are, scammers are often convincingly professional, with credible looking websites, testimonials and materials that are hard to distinguish from the real thing. It’s therefore vital that you are able to spot the warning signs of a pension scam.
How to spot a pension scam
Here are some of the tell-tale signs to look out for:
- Cold calls, emails, or texts. Cold calls about pensions are illegal – and that covers emails, texts, WhatsApp messages, and other forms of messaging too. Cold calls shouldn’t happen, so put the phone down as soon as you receive one.
- High-pressure sales tactics. Fraudsters also use high-pressure sales tactics like time limited offers to get the best deal. Some even use couriers to send documents, who then wait and put pressure on you until the documents are signed. You should never feel pressured into making a decision quickly and you should always seek professional advice before doing so.
- Misleading websites. Scammers often advertise online using misleading websites that may appear authentic or government-backed; but these can be cloned from legitimate organisations; even if they look official, remember that appearances can be deceiving.
- The promise of a guaranteed better return on your pension savings. Typically, scammers will try and persuade you to invest your pension pot in unusual investments such as overseas property, forestry, storage units, care homes, biofuels or businesses you may not be familiar with. Chances are, they are unregulated and therefore high risk. They may promise guaranteed returns or cash from your pension to tempt you to take up these offers.
- You are offered a free pension review. If you’re contacted unexpectedly and offered a free pension review, it’s likely to be a scam. Professional pensions advice from a qualified financial adviser is not free. Scammers will sometimes go as far as claiming they are acting on behalf of the FCA or Pension Wise.
The two most common scams to look out for
1. Early pension release scams
Be extremely cautious of any scheme offering to help you release cash from your pension before your normal minimum pension age (NMPA), currently age 55 (increasing to age 57 from 6 April 2028, unless you have a protected pension age). Often called ‘pension liberation’ or ‘pension loans’, these schemes are almost always scams.
While it’s not against the law to access a pension before the age of 55, doing so isn’t recommended. This is because HMRC charges up to 55% tax on the amount you request to withdraw early, significantly impacting how much of your pension you’ll end up receiving. An early withdrawal means you could risk running out of money before retirement and having to work for longer to save more into your pension.
Many third-party companies claim they can help you access your pension early by exploiting loopholes in the system. As an example, these companies could charge you up to 30% of your withdrawal amount to access your pension. So, you’d be charged 55% tax for the early withdrawal, plus a further 30% by the third-party, leaving you with just 15% of your pension.
After fees and taxes, any remaining funds are often invested in high-risk ventures, like overseas property developments, or are simply stolen.
2. Pension review scams
Professional advice on pensions from a qualified adviser is not free. As such, if you are contacted unexpectedly and offered a free pension review, it’s highly likely to be a scam.
Free pension reviews are designed to persuade you to move your money from your current pot into a high-risk scheme. Your pension pot is then invested in unusual investments such as overseas property, forestry, storage units, care homes, biofuels or businesses you may not be familiar with. Some of these investments are badly run, while others are outright scams.
You may be promised guaranteed returns or cash from your pension to tempt you to take up these offers. However, as they’re promoted as long-term pension investments, it could be several years before you realise something is wrong.
Reports on the rise
Pension scams in the UK remain a serious and growing threat to savers’ financial security. In 2024, Action Fraud data found that criminals had stolen a total of £17.5 million from savers. The average loss per victim was around £33,848, highlighting how devastating these scams can be for individuals approaching or in retirement.
These figures are likely underestimates, as a significant proportion of scams go unreported, meaning many victims never come forward or realise they’ve been targeted.
If you think you might already have been targeted and you’ve agreed to transfer your pension, take action fast:
- Contact your pension provider immediately – they may be able to stop the transfer if it has not already gone through.
- Report the scam – in the UK you can report fraud through Report Fraud, and you can also contact Action Fraud on 0300 123 2040 to log your case.
Anyone can be the victim of a pension scam. If you have any concerns, please call the George Square team on 0115 947 5545 or send us a message here.