As changes to inheritance tax rules loom, savers are growing increasingly uneasy about the future of their pensions. Claire Trott, Head of Advice at St. James’s Place, warns that vague legislation around the inclusion of unused pension savings in the IHT net from April 2027 could prompt hasty decisions—putting individuals at greater risk of fraud.
Claire Trott, Head of Advice at St. James’s Place says: “With unused pension savings due to be brought inside the inheritance tax (IHT) net from April 2027, and the legislation and communication around how this will work remaining vague, savers may feel unsettled and unsure about whether to continue putting money into their pension. Some people may even be tempted to withdraw large sums from their pension out of fear their families will be hit with an IHT tax bill in future. This is particularly worrying as it can increase vulnerability to potential scams. Pension providers offer protection against scams, so when savings are taken out of these schemes they are more susceptible to fraudulent activity. In addition, those who withdraw funds with no real plan for what they are going to do with the money can find themselves at a higher risk too. They may be approached by someone offering to take care of their cash, IHT free –, and while this may sound appealing, it could be a scam.
“Anyone that is considering accessing their pension to avoid an IHT bill should seek financial guidance where possible, especially if they’re taking money out without knowing what to do with it. It’s important to be armed with information about how to navigate the upcoming changes, but also to ensure hard-earned pension savings are kept safe from scammers.”
Claire Trott shares tips to protect consumers from pension scammers:
- Be wary of unsolicited calls: “It’s important to remember that pension cold calling is illegal in the UK. If you receive a call from an unknown caller about your pension, it’s likely to be a scam, so do not share any personal information or move money out of your pension at their instruction. Hang up or if you can get some information on them e.g., their phone number and company name, report it to the Information Commissioner’s Office so they can take necessary action. Be cautious of emails, texts, or messages on social media offering “free pension reviews” or “guaranteed returns” too.
- Don’t be rushed to take action: “A tactic scammers often use is to pressure you to act quickly. Take your time to make decisions and consult with trusted advisers or family members before moving money from your pension. Remember, a genuine adviser will give you time to consider and won’t rush you into a decision.
- Be aware of red flags: “The following terms are used often used by pension scammers, so if you see any of them, be aware as it could be a scam. Promises of “high or guaranteed returns”, “overseas investments” or schemes that seem too good to be true, probably are. Requests to transfer your pension into a single investment, especially if you’re offered cash back or an upfront bonus, is another red flag to avoid.
- Only use trusted sources: “As a rule on thumb, government-backed services like Money Advice Helper or Pension Wise are safe sources to use for pensions advice. It may also be worth speaking to a regulated financial adviser who can guide you through the upcoming pension changes and how to manage your estate.”
