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Pension scams – the warning signs

Legal Question Time with Gardner Leader

Pension scams – the warning signs

Katie Dyson

Following the launch of a recent high profile campaign by the Financial Conduct Authority (FCA) and the Pensions Regulator, now is the perfect time to make sure that you and your colleagues are ScamSmart.

Fraudsters use a number of tactics to persuade victims to transfer their pension pots into unusual or exotic-
sounding investments.

In reality, the target’s money is often either kept by the fraudsters or invested in high risk, unregulated schemes that are inappropriate for pensions and have little prospect of providing a return.

Once the money is gone, it is extremely difficult to trace and rarely repaid.

In 2017 alone, Action Fraud received reports from 253 victims of pension scams, with an average loss of more than £91,000 each.

Sadly, this is likely to be the tip of the iceberg, as there is evidence to suggest that the majority of such scams are unreported.

The recent rise of pension scams is an unfortunate side effect of the various ‘pension freedoms’ introduced by the Government a few years ago.

While the flexibility provided by the rule changes have been welcomed by many, fraudsters have devised new ways to exploit them by duping people out of their savings.

Not all high risk investments are fraudulent and, within the bounds of the law, people are free to invest their money however they wish – even if their decisions appear unwise to others.

In the 2016 case of Hughes v Royal London [2016] EWHC 319 (Ch), the High Court upheld a saver’s right to transfer her pension pot to a potentially risky overseas investment that she had no employment links to.

It is important, however, that savers have all of the information that they require to understand the potential risks and make an informed decision.

If the investment is not only high risk but also potentially fraudulent, thorough research may help to uncover some important warning signs.

You and your colleagues can avoid pension scams by learning how fraudsters operate.

According to the Pensions Regulator, scam tactics can typically include unexpected contact from a ‘professional’ offering to provide a free pension review.

Fraudsters often come prepared with impressive-looking material and testimonials to try to convince you that they are legitimate, and may put pressure on you to act quickly so that you do not have an opportunity to verify their claims.

I would recommend that you are extremely cautious about such unexpected investment opportunities.

Always take the time to get advice and make sure that it is entirely independent of the investment scheme and its representatives.

There are a number of trustworthy organisations that may be able to give you free impartial guidance, such as the Pensions Advisory Service.

If the scheme’s representatives put pressure on you to act quickly and without the benefit of independent advice, walk away.

In addition, you may also conduct your own investigations into the scheme and its representatives.

The FCA’s website allows you to check the Financial Services Register to make sure that the investment’s representatives are properly authorised, and provides information on scam warnings provided by foreign regulators.

Remember to always access the register through the FCA’s website – do not trust any links contained within materials provided to you by the scheme.

If you think that you have been approached by fraudsters, you can report it to the FCA and Action Fraud.

If you have already taken steps to transfer your pension or savings to a suspicious scheme, contact your pension provider immediately – there may still be time to stop it.

For free guidance, go to

Katie Dyson, solicitor – dispute resolution team, Gardner Leader, Newbury office.

T: 01635 508073


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