Early pension release scams

You should be very wary of any scheme offering to help you release cash from your pension before you’re 55, as this will very possibly be a scam. This may also be called ‘pension liberation’ or a ‘pension loan’, as it’s often claimed you will borrow money from your pension fund.

Generally, you can only take money from your pension when you reach 55 (increasing to 57 by 2028) or older except in certain circumstances, like having a terminal illness. If you do withdraw your pension before retirement age, you could face a tax bill of 55%, plus other charges, on what you withdraw.

Investors are often called out of the blue, but contact can also come by email, post, word of mouth; there are no limits on how these scammers may contact you. You could be offered a free pension review, then told you can take cash from your pension even though you’re under 55. This may be called a ‘loan,’ ‘saving advance’ or ‘cashback.’

Your pension funds will be transferred from your legitimate pension scheme into one set up by the scam. This new scheme is often based abroad. You may be ‘loaned’ an amount (often around half of your pension) with the company involved taking a fee, often as much as 30%. This fee is often unclear and doesn’t include the tax you will owe for accessing your pension early.

Any money remaining in the scheme after fees and tax are paid will then be invested in high-risk products or projects like overseas property developments – or it’s sometimes simply stolen outright.

Pension review scams

Pension review scams contact people unexpectedly, offering a free pension review. This could be a phone call, an email, text message or an offer in an online advert; again, there are no limits on how these scammers may contact you.

Free pension reviews are designed to persuade you to move money in your pension 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.

You may be promised guaranteed returns and/or a cash sum from your pension to tempt you to accept these offers. Some of these investments are badly run, while others are outright scams.

As they’re promoted as long-term pension investments, it could be several years before you realise something is wrong.

Crypto asset investment scams

Crypto asset fraudsters tend to advertise on social media, often using the images of celebrities or well-known individuals to promote cryptocurrency investments. The adverts then link to professional-looking websites. Consumers are then persuaded to invest with the fraudster firm using cryptocurrencies or traditional currencies.

The firms operating the scams are usually based outside the UK but will claim to have a UK presence, often a prestigious City of London address. Scam firms can manipulate software to distort prices and investment returns.

They may scam people into buying non-existent crypto assets. They are also known to suddenly close consumers’ online accounts and refuse to transfer the funds to them or ask for more money before the funds can be transferred.

Do your research

Before you take any action or engage with a company who contacts you unexpectedly, you should always check the validity of these companies. Check the FCA status of any firm you intend to deal with for investments; call them 0800 1116768 or go to www.fca.org.uk/register.

You should always check out any company you are going to do business with, especially if it involves you handing over money.

Let the buyer beware

You may be aware of the legal principle ‘caveat emptor’ which translates as ‘let the buyer beware.’ This means that in law that there is a basic premise that the any due diligence falls upon us as consumers before completing a purchase, which includes money matters.

If you get a cold called in relation to your pension or a crypto asset, the safest thing to do is hang up, it’s illegal and probably a scam. You can also report cold calls to the Information Commissioner’s Office (ICO).

Be wary of adverts online and on social media promising high returns on investments in crypto asset or crypto asset-related products. Most firms advertising and selling investments in crypto assets are not authorised by the FCA.

This means that if you invest in certain crypto assets, you will not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong.

More ‘traditional’ scams

Whilst criminals are becoming more creative with the tactics they use, it’s well worth being aware of what would be considered more ‘traditional’ scams. These include:

1. Boiler-room schemes - These scams promise investors impressive returns - but deliver nothing. You will most likely be told that you must act fast, and you will be asked to transfer your money straight away.

Don’t be rushed into making an investment. Remember, legitimate organisations will never pressure you into investing on the spot, and before making significant financial decisions, speak with trusted friends or family members, or seek professional independent advice.

2. Phishing/smishing - The most common scams come from fraudsters posing as someone official, telling you they are from your bank or building society. Typically, you receive an email or text asking you to click a link and verify log-on, account and password details. The communication received is from a fraudster who will be able to read the information you type in.

This information is then used to access your account. If you lose money this way, it’s unlikely you will get it back.

Your bank will never ask you to disclose full security and password details, so alarm bells should ring. If in doubt, call your bank and ask them if they have tried to contact you.

3. Freebie scams - Seemingly free trial offers for products are duping consumers out of millions of pounds a year. To get the freebies, you need to enter your card details in order to pay for postage and packing, or you’re told you won’t be charged for any introductory period. In fact, you are often signing up to an expensive monthly subscription that is very difficult to get out of.

A freebie isn’t a freebie if you have to pay for it! Fraudsters often put a spin on your payment, calling it a ‘processing fee’ or ‘handling fee’, and then disappearing without sending your sample. If you’re not sure that the offer is genuine, be prepared to walk away. It’s never worth putting your privacy or financial security at risk for a free sample that’s likely to be worth very little.

You can report such free trial offers to The Advertising Standards Authority, who can be contacted on 020 7492 2222 or to make a complaint visit https://www.asa.org.uk/make-a-complaint.html.

If you think you may have been a victim of a fraud scam

Scams can happen to anyone. Don’t be ashamed about reporting a scam – you could even help stop it happening to someone else. If you’ve lost any money in a banking fraud, the first thing you should do is get in touch with your bank so they can cancel any cards or freeze your account. Then, contact Action Fraud on 0300 123 2040 or through their website http://www.actionfraud.police.uk/.

Remember:
• Don’t open emails or attachments from someone you don’t know.
• Your bank will never call you and ask for your PIN number or for you to give your card to a courier.
• Avoid pension scams by getting independent, regulated advice before making decisions.
• Don’t believe letters or emails claiming you have won a fortune. If you haven’t entered a lottery or prize draw, you can’t have won it.
• Don’t be embarrassed to hang up, say no, or ask someone to leave
• Be vigilant, if someone you know or care for is getting unusually large amounts of post or spending a lot of money, give them some relevant advice from this guide (perhaps even share it with them) and encourage them to report the scam.

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this article was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may impact on the accuracy of the article.

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