Financial planning

How to spot a pension scam?

Colin Dyer

Since pension freedoms in 2015, we have a lot more choices when it comes to managing our pension savings. This isn’t a bad thing; it makes sense to allow people access to their pension pot if done in the right way. However, the options that we now have not only mean individuals are faced with additional responsibility when it comes to saving for retirement, but also that we may be more susceptible to pension scams.


Accessing early, transferring or consolidating your pension will not be right for everyone. You need to consider all the facts to decide if it’s right for you.

What can happen if you fall victim to a pension scam?

If you transfer your pension savings into a scam, you run the very real risk of losing a significant, if not all of your pension savings, as well as facing high commission or arrangement fees.

Some pension scams may let you access your pension early. This is only allowed in very special circumstances, such as ill health. Under any other circumstances, accessing your pension before the age of 55, this will classify as an ‘unauthorised payment’ from your pension fund. This will result in significant tax penalties and HMRC can impose a charge of up to 55% of the value of your pension.

This means that at the end of the transaction you may just get little or nothing of your original investment back, and also owe money to HMRC.

How to spot a pension scam

According to the Financial Conduct Authority (FCA), pension scams can be difficult to spot. Scammers usually contact people out of the blue via phone, email or text, or even advertise online.

Scammers can often sound incredibly convincing in their financial knowledge. They may even have credible-looking websites, testimonials and materials that are hard to distinguish from the real thing. With that in mind, here are some steps that can protect you from pension scams:

Step 1 – reject unexpected offers

The recent Budget proposed a ban on cold-calling, however until this becomes a reality for legitimate businesses, it’s a good idea to avoid any unexpected calls concerning your pension altogether.

Step 2 – understand who you’re dealing with

The FCA is responsible for regulating the financial services industry, including the conduct of more than 58,000 businesses. Even if you think a company is legitimate, it can’t hurt to check the FCA register to see if they are authorised.

It can also be a good idea to check the contact details you have been given against the register. If the contact details you’ve received are different, bear in mind that you could be dealing with a ‘clone firm’ masquerading as an authorised company.

Step 3 – never feel pressured

A legitimate company shouldn’t pressure you into making a decision. When it comes to managing your pension you could be making life-changing decisions. Take the time you need to make the right move for you.

Step 4 – The importance of advice

You should seriously consider seeking financial advice before changing your pension arrangements.

A financial planner could help you make the best decision for your own personal circumstances; including helping you avoid pension scams and ensuring any changes to your pension are carried out in the most tax efficient way.

Think you could benefit from advice?

If you have any questions about anything covered in this blog, or would like to discuss your options when it comes to your pension, your 1825 Financial Planner will be happy to help.

If you’ve yet to find a financial planner and you would like to find out more about how we can help, please get in touch.

Investments can go down as well as up and you could get back less than you put in. The information in this blog should not be regarded as financial advice.