Pension savers are being urged to stay alert after new research suggested many people could struggle to spot the warning signs of increasingly sophisticated scams, with victims losing an average of around £47,000.
Confidence vs. reality
The findings, released by retirement specialist Standard Life, suggest that while many people believe they would recognise a pension scam, common misunderstandings about pension rules could leave them vulnerable to fraudsters.
According to the research, 62% of UK adults said they were confident they could identify a pension scam. However, the company's pension scam test found that many people failed to recognise some of the most common warning signs.
Key misunderstandings
One of the biggest areas of confusion involved cold calls. Three in five people (60%) either incorrectly believed pension providers or advisers are legally allowed to cold call people about pension opportunities or reviews, or said they did not know. In reality, legitimate pension providers and advisers are not allowed to make unsolicited cold calls about pensions.
The warning comes after figures from Report Fraud showed pension scam victims lost an average of around £47,000 last year.
The research also found nearly three in four people (73%) either believed that any investment offered by a company on the Financial Conduct Authority (FCA) register was automatically safe or were unsure. Meanwhile, four in 10 (40%) either believed they could access their pension at any age or did not know the correct answer.
Trusting the wrong signs
Standard Life also found some people may be placing too much trust in signs that do not necessarily mean an investment opportunity is genuine.
One in five (20%) believed a professional-looking website and positive online reviews were reliable signs that a pension opportunity was legitimate, while 14% believed adverts on professional or social networking websites meant a company could be trusted.
At the same time, more than half of those questioned (53%) correctly recognised that pension scams can involve real companies, genuine advisers and authentic-looking paperwork, making them much harder to identify.
Lack of checks
The research also suggested that some people are not carrying out independent checks before responding to pension opportunities. While some said they spoke to family or friends or researched a company online, 8% admitted they carried out no checks at all.
Donna Walsh, Head of Master Trust and IGC Governance at Standard Life, said: “Pension scams are increasingly sophisticated making them appear genuine. They can come with convincing websites, positive reviews, familiar names and paperwork which is exactly why they can be so dangerous.”
“What stands out from our test is that many people could benefit from greater awareness of some key pension rules and warning signs. That’s important because understanding how pensions work can help people make more confident decisions and better protect the savings they’ve worked hard to build.”
“The industry from providers, workplace employers, and advisers to our regulators, is taking action and pulling together to build awareness to help pension scheme members spot fraudulent approaches.”
“Likewise, a reinvigorated PSIG, the pensions scams industry group, is stepping up its activity and education programme to combat such approaches.”
“With changes to the inheritance tax treatment of pensions approaching and people likely to be reassessing their retirement plans increased vigilance is required, with fraudsters often quick to exploit periods of change and uncertainty.”
“The best protection people can take is to pause, check independently and avoid being rushed. A legitimate pension opportunity should never depend on pressure, urgency or confusion. If in doubt, contact your pension provider.”
“The more people understand the warning signs and know which checks to make, the better placed they are to protect their savings, achieve greater financial security in later life and make informed decisions about their financial future.”
