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Pension transfer fraud – five ways to avoid it.

by | Feb 3, 2021

The dangers of pension fraud hit an all-time high in December as three in four pension transfers triggered a scam warning. Savers have been warned to be on high alert for fraudsters, who have taken advantage of the pandemic to swindle the most vulnerable out of their life savings.

The number of pension scam alerts skyrocketed in 2020, tripling between January and December. By the end of the year, 76% of all transfers showed at least one warning sign of a potential scam according to figures from XPS Pensions Group – a consultancy that tracks the pension transfer market.

Helen Cavanagh, of XPS Pensions Group, said the sharp increase was “extremely worrying”. She said: “Over half of all the scam warning signs identified over the month were fee related, including members’ lack of understanding of the fees involved, which could indicate members are transferring to arrangements that could be detrimental to their retirement outcomes.”

Since 2015 savers have had more flexibility to invest their pensions as they wish thanks to new freedoms. However, this has opened them up to attempts by fraudsters to convince them to transfer their cash into bogus investments. Record-high cash transfer values have been a temptation for those who would consider ditching their gold-plated final salary pension schemes in favour of more flexible defined contribution pensions. Despite this freedom, fewer people went through with a pension transfer in 2020, with a 20% drop-in activity.

Five ways to spot a pension scam. Tom Selby of stockbroker AJ Bell says:
  1. Watch out for investment ‘opportunities’ that sound too good to be true. Schemes offering high guaranteed returns are often at the heart of pension and investment scams.
  2. If you are contacted out of the blue about your pension by someone you do not know, either by phone, email, text message or on social media, do not respond.
  3. Be extremely wary of anyone offering ‘free advice’, a ‘free pension review’ or ‘early access’ schemes. Advice is never free, and you are not allowed to access your pension before age 55 unless you have serious health issues.
  4. If you are speaking to an adviser about your pension, make sure they are regulated and check their credentials out via the FCA register.
  5. Don’t be rushed or pressured into making a decision about your pension – such tactics should set off a big red warning light in your mind and are often indicative of a scam.

If you’re looking for help on your pensions and investments, or you’re concerned about the security and validity of any opportunities offered – feel free to give the team at GSI a call.

Adapted from an article written by Jessica Beard


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