WARNING: Beware The Pension Release Scams

Anthony Burgess (Pension & Investments)

Written by Anthony Burgess (Pension & Investments) on January 31, 2019

Updated June 6, 2019

Couple hit by pension scam

What we all want is to be able to have a comfortable retirement, and our pensions are a great way of securing a reasonable retirement income. Pensions are not the most straightforward of financial products, with various types and options to consider and be aware of. In recent years, we have seen an increase in fraudsters targeting individuals to scam them out of their pension savings.

With advanced technology and digital communications, these scams are getting harder and harder to identify, and while more is being done to prevent them, fraudsters are still often succeeding. If you fall victim to one of these pension release scams, your lifetime savings could be gone in just seconds, with little hope of getting it back.

It is vital that you protect yourself from these scams and have the knowledge and awareness to keep your pension savings safe. This guide covers what a pension release scam is, how to spot a pension release scam, and how to protect yourself.

What is a pension release scam?

Pension scams come in all shapes and sizes, and they can all result in your lifetime of savings being lost to fraudsters. Pension release scams are one of the most common types of pension scam, and they work by the scammers convincing individuals that they are eligible for an early pension release. They will often offer cash incentives for releasing your pension early and could refer to them as a ‘saving advance’ or ‘pension loan’.

For most individuals, once you reach the minimum age of 55, then you can access the money in your pension pot. You will only be allowed to withdraw your pension early if you can prove that you meet a certain criterion, such as being medically advised that you have less than twelve months to live or a medical condition that prevents you from working. These options do not apply to most people, and the majority of individuals will not be eligible for an early pension release.

There are various tax implications to accessing and withdrawing your pension early, as HMRC view this as an unauthorised payment. They will charge you 55% tax on your pension withdrawal and will still charge you even if you were subject to a pension release scam. This can means you end up losing 155% of your pension, if you lose 100% to scammers, and then get charged 55% by HMRC in taxes.

How to spot a pension release scam?

Fraudsters have become very skilled in making their communications look legitimate, and it is often difficult to spot a scam. However, there a few tell-tale signs and things you should check to ensure you are not being targeted for a pension release scam:

  • Out of the blue, and completely unsolicited contact by phone call, email, text message or even in person.
  • If you ask to call them back another time and they don’t accept this. They may instead arrange for another time for them to call you.
  • Being pressured to make a decision very quickly.
  • Being encouraged to transfer your pension straight away and send the relevant documents by a courier.
  • You are given contact details, or there are contact details on their website, that only include mobile numbers or PO box addresses.
  • You are offered to release your pension before your turn 55. This is only a legitimate option to those in very poor health.
  • If you are contacted by someone who claims to know tax loopholes to release your pension early or can promise extra tax savings.
  • If someone offers you high rates of return on your investments but claim that the investments are very low risk.

Some scammers will have very convincing websites and a good online presence, which often makes them look like a legitimate business. You should always double check with the FCA that any pension companies you are considering are registered and regulated.

How to protect yourself from pension release scams?

If you are careful, then it is easy to avoid being caught out by these pension release scams. Now you know what to look out for, it should be easier to identify if a fraudster is trying to scam you and steal your savings. There are some simple rules you can follow in order to protect yourself and your savings from pension release scams:

  • If you receive unsolicited emails, texts, calls or visitors then ignore and reject them. No legitimate company will contact you or cold call you completely out the blue.
  • If you do feel an opportunity you have come across is legitimate and a good deal, then seek independent financial advice from someone registered by the FCA.
  • Double check all companies you are considering are regulated by the FCA, and also check the FCA warning list.

If you are concerned you have already fallen victim to a scam and have signed something that might not have been legitimate, then contact your pension provider immediately. They might still be able to put a stop to the release before it has gone through.

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