Pension scam tactics emerged following the Pension Freedoms Act in 2015 because people were able to withdraw all the money from their pensions in one go. Scammers would target vulnerable pensioners as they believe they can manipulate them. Action Fraud reported a doubling of the average amount lost by pension scam victims in 2021 to £50,000 from around £23,689 in 2020, with the Pension Scams Industry Group (PSIG) estimating 40,000 people lost around £10billion to fraudsters since 2015.
On the interactive investor Youtube Channel, Becky O’Connor, head of pensions and savings, spoke to James Jones-Tinsley, technical specialist at pensions consultants Barnett Waddingham about the rise in pension scams and how Britons can avoid them.
Thousands of pensioners have fallen victim to these scams and lost their whole life savings, forcing them to struggle during retirement.
“Millions of pounds have been lost to scammers and in reality, the figures will be much larger than official statistics as people are embarrassed to admit they have been the victim,” Mr Jones-Tinsley said.
It’s the promise of higher returns that seems to be luring people in, he explained.
He said: “The biggest scams seem to include domestic investments.
“Things like car parking spaces, typically at airports or store pods.
“This is where people rent out a building or a unit in which to store things.
“People have been encouraged, typically by unregulated bodies or people, to put all of their pension savings in these with the promise of high returns and unfortunately a lot of them have just failed.
Mr Jones-Tinsley replied: “I’ve heard stories about people saying we’ve got to get this done quickly or the closing date is fast approaching.
“If they get far enough with that individual, I have known situations where they have sent a courier round with the paperwork, to get it signed there and then.
“They are going to great lengths to get people to sign and the dotted line.”
These scammers may not always know about each person’s specific financial information, they will just dial thousands of numbers and wait to see who answers first. This is called cold calling.
He added: “A large part of what comes in with pension scams is the vulnerability of people.
“Particularly say it’s an elderly person living on their own it can be quite distressing to be getting all these silent calls and then ultimately get one from somebody who will very quickly ascertain who they are talking to and start their pitch.
“Since the start of the pandemic in March 2020, we definitely saw an increase in scams then and people have been contacted in many different ways such as texts and emails, as well as phone calls even though in theory they are banned by legislation.”
If in doubt about who is talking on the phone, Ms O’Connor suggested checking the Financial Conduct Authority register to verify the person who is on the phone asking questions. Alternatively, Britons can speak to a trusted relative for a second opinion.
He he added: “Sadly, a lot of people fall for the call and take it at face value and believe it is genuine and I think the simple way to deal with it is hang up.
“Terminate the call if it’s from someone you’re not expecting. If it’s important they will get back to you.”
The ban on pension cold-calling was only enacted in 2019 however the amount of cases still increased. The latest measures, introduced in November 2021 require pension providers to ask basic questions that can identify tell-tale warning signs of scams before customers transfer money out.