pension fraud

11 tips on how to avoid pension scams

The idea that you could be scammed out of thousands of pounds from your hard earned pension is frightening. However, it can and does happen, so it is important that you know how to tell if you are targeted and how to deal with it.

For many people, their pension is their most valuable asset and is the culmination of many years of hard work. It can offer you financial security in retirement and beyond, providing funds for care needs and supporting family members. Because of pensions and how valuable they are, they become targeted by scammers who want to take your savings and leave you with nothing.

This useful guide will aim to define potential pension scams, how they work and to provide useful tips on how to avoid them.

What is a pension scam?

Pension scams are becoming more common in the UK each year. Each day, sophisticated fraudsters are using new methods to identify and scam unaware savers, taking their hard earned cash in just minutes.

According to the Financial Conduct Authority (FCA) and The Pensions Regulator, pension scam victims are estimated to lose an average of £91,000 per scam, totalling to more than £4billion a year to fraudulent activity. This Guardian article provides more information about the rising numbers of scam operations.

The chances that someone will fall victim to pension fraud rises by more than 60% if they are seeking to increase their income following retirement.

In an increasingly digital age, advances in technology and digital communications over the internet and your mobile devices have provided scammers with more varied methods to access your pension pot.

Despite there being many forms of pension fraud, each and every one of them can sadly leave you penny less within minutes.  Many scammers will have developed convincing websites that mimic genuine pension sites, making them seem legitimate.

However, you must always check with the Financial Conduct Authority (FCA) and The Pensions Regulator when accessing your pension to ensure the company is authorised and legitimate.

Since 2015, there have been a growing number of ways in which you can access your pension pot. Fraudsters have identified this and are exploiting this new flexibility by offering lump-sum cash and seemingly attractive deals which they say can guarantee you with high cash returns.

This video provides useful scam advice and how to recognise and avoid a scammer if you are approached.

How do pension scams work?

A scam will often begin with a phone call, text message, email or social media message, with the scammer offering you a free pension review or suggesting a deal which would see you receive high returns on your pension.

If the scammers do gain access to your pension pot, they can easily transfer your money into their own accounts or invest your pension into high-risk investments that are not suitable for retirement savings.

This BBC article highlights the amount of money lost to pension scams each year, as well as providing useful scam advice and statistics to help you protect your pension.

pension liberation

11 ways to avoid pension scams

This section will provide 11 tips to help you avoid being scammed out of your pension.

1)  Be aware of common scamming signs

There are some commonly seen signs that suggest you may be a target, these include:

  • Random phone calls or text messages from unknown numbers, which is known as cold calling. Since January 2019, a cold calling ban was introduced, meaning you should not be contacted by anyone regarding your pension unless you have given them permission to.
  • If a firm does not give you the opportunity to call them back
  • If, over the phone, text message or email, you are pressured into making a decision, such as transfer pension funds or send the scammed your pension documents
  • The caller may claim that they can help you or a member of your family gain access to your pension pot before the age of 55. This is often known as pension liberation and is only available under certain circumstances such as ill-health. Quite often the callers will not mention any of the HMRC rules on pension liberation.
  • As well as using language such as ‘pension liberation’, they may also use ‘loan’, ‘tax loophole’ or offer a ‘free pension review.’
  • They may promise tax savings on your pension pot by claiming to known tax loopholes which could increase the earnings on your savings.
  • They may be unclear of the payment structure they are suggesting, giving no real information about where your money will be invested. This could include arrangements with third parties overseas, who would each receive a portion of your pension pot.

If you take money out of your pension before turning 55 through pension liberation, you may be liable to receive tax charges on more than half the sum you withdraw, in addition to charges incurred from entering a pension liberation arrangement.

2) Be aware of unsolicited calls

Reject and ignore any unsolicited cold-callers, emails, text messages and people knocking at your door. No legitimate pension company will act in this way, nor will they demand and pressure you to transfer pension savings and documents over the phone. Since pension cold calling is now banned, you can report any cold caller to the Information Commissioner’s Office.

3) Check the FCA warning list

Check the FCA website for a list of registered companies. You could also check the FCA warning list to identify any potential scammers you may be worried about. Any company that is not authorised by the FCA or is on their warning list, you should not contact them or agree to let them access your pension pot.

scam advice

4)  Be aware of someone unknown offering you a good deal

If you are thinking about participating in an arrangement presented by someone unknown to you, you should contact a financial advisor from an already authorised pension firm; again use the FCA website to identify an authorised and regulated company. 

5) Speak to Pension Wise if you are thinking about taking retirement

If you are aged 50 or over, you could be eligible to receive advice from the Pension Wise guidance scheme, which is available on their website. This resource could provide vital advice depending on your situation, which could save you thousands of pounds of your pension saving if you are the target of a scam.

6)  Check the legitimacy of websites

Always be wary of websites are there are some out there that imitate legitimate pension companies. For instance, a copycat website may look like an official government service such as Pension Wise, when, in fact, it is a scammer waiting to access your details. Unfortunately, we have seen a great number of these pop up recently.  

Here you can see 5 ways to tell if a website is legitimate

7) Be wary of direct calls from your pension provider

If you receive a phone call from someone claiming to be your pension provider and that they have changed their bank account details and require payment into a new account, this is almost certainly a scam.

Your pension provider will never tell you this over the phone, nor will they demand payment over the phone.

Also, think about whether you ever even gave your phone number to your pension providers.

8) Call Action Fraud if you are worried

If you have been targeted by a pension scammer, you can call Action Fraud on 0300 123 2040, and use their online reporting tool.

You can also contact the Pensions Advisory Service if you have been contacted out of the blue about your pension.

9) Don’t be pressured to make a decision

Do not be pressured into anything that you are not 100% sure about. Although it has been found that 95% of people reject any offer presented by a cold caller, you may find it hard to turn down a seemingly amazing deal, where the scammer promises unrealistic cash returns in the future.

10)  Be wary of offers to transfer your pension abroad

Be wary of those who contact you trying to persuade you to transfer money abroad. Once you have committed to moving your money into a foreign account, it becomes much harder to track. Overseas pension schemes are becoming increasingly targeted by pension scammers who target those who wish to move abroad following retirement, so you should be vigilant if this applies to you. 

11)   Be wary of investing in developments abroad

Ignore any claims that you could gain money from developments abroad. Usually, these ‘developments’ do not exist and perhaps never will and can range from hotel rooms to tree plantations.

For example, in December 2018 alone 5 companies were forced to close down after convincing more than 100 people to invest their pension into fictitious developments.

This article by the Express warns of the dangers of pension scams and the risks people take at the expense of their savings. Obviously, it would be heartbreaking to lose a lifetime’s worth of savings to a scammer, leaving you with no backup or source of income following retirement.

As a result, by using the useful tips presented in this article, as well as researching pension scams further, you can avoid being scammed and ensure your pension pot is secure for your future.

penion scam leaflet

Pension Scam advice from the FCA

The pension scams leaflet provided by the FCA provides a brief, but useful guide to pension scams and how to avoid them. The pension scams leaflet is just one example of the many resources available to help you understand and avoid pension fraud.

If you require advice, you can talk to us here at UK Care Guide, the FCA or the Pensions Regulators, and we’ll answer any questions you may have.





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