Tom Selby, director of public policy at AJ Bell, comments on The Pensions Regulator (TPR) and Pension Scams Action Group (PSAG) adopting the use of AI to detect scam websites:
“Stopping pension scammers is a perpetual game of whack-a-mole. Whenever one scam is shut down another soon starts up in its place. That means it is vital that regulators and bodies like Action Fraud use every tool at their disposal to fend off scams as they emerge, closing down fraudulent websites as soon as possible before they’re able to lure in victims.
“This latest measure from TPR shows regulators are using technology to their advantage in the continuing fight against pension scams.
“Bad actors will always exist and seek to take advantage of vulnerable individuals, often using duplicitous tactics to convince people they’re able to access their pension early. In reality victims find that not only are they unable to get their money on their pension early, but their money may in fact be gone for good.
“Shutting down scams as soon as possible is a crucial part of the battle. But it is equally critical people are alert to the risk of scams and protect themselves.
“When most people access their pension, they will either be moving into retirement and taking a regular income to fund their lifestyle or taking a chunk of money out for a specific purpose, such as paying off a mortgage. However, you need to be wary of scammers who may offer high-risk, unregulated investment ‘opportunities’ which often promise sky high returns over short periods of time.
“Such offers will often come with exorbitant fees and, in the worst-case scenario, will simply be out-and-out fraud, with a criminal taking your hard-earned retirement pot and scarpering. What’s more, by withdrawing a large amount from your pension, you will have taken it from an environment where it can grow tax-free and enjoys the Financial Services Compensation Scheme (FSCS) protection of up to £85,000 to an unregulated Wild West where you may have little or no protection.
“Government could do more to help stifle pension scammers by committing to a Pensions Tax Lock. Speculation about the future of pension taxation often sees bad actors trying to take advantage of people. HMRC has acknowledged the danger this can increase people’s susceptibility to pension scams. If the government committed to a Pensions Tax Lock, saying explicitly they will not change the fundamental tax features of pensions, they can give pension savers a guarantee of stability on pension taxation and allow them to plan for their long-term future with confidence. That would put an end to the dangerous rumour and speculation which provides fertile ground for scammers.”
Five ways to protect your pension from scammers
There are a number of simple things you can do to protect yourself from fraudsters:
- Be suspicious of unsolicited calls, texts, emails or unregulated offers on social media: Scams often start with a call, text or email out of the blue offering ‘help with’ or perhaps a ‘review of’ your pensions or investments. Social media is also an increasingly lucrative hunting ground for fraudsters. To be safe, if someone you don’t know contacts you about your pension or investments – or indeed your finances in general – do not engage with them. If you believe someone is trying to scam you, report them to Action Fraud to help protect other investors.
- Be extremely wary of anyone promising large, guaranteed returns or early access to your pension: Another tell-tale sign of a scam is the promise of huge, guaranteed investment returns, often over relatively short spaces of time. These investment ‘offers’ take many weird and wonderful forms, while the rise in popularity of cryptocurrencies has also been an obvious target for financial fraudsters. In addition, anyone claiming they can facilitate early access to your pension is almost certainly a fraudster.
- Only deal with regulated companies and individuals: At the heart of scams are often unregulated ‘introducers’ peddling unregulated investments. While there is nothing wrong with investing in unregulated assets, where fraud occurs these often turn out to be vastly overhyped or entirely fictitious. Even where an unregulated investment is real, if you suffer losses through misselling you will not qualify for FSCS protection.
- Do your due diligence: Scammers’ tactics have become more sophisticated in recent years, with ‘clone’ scams – where fraudsters impersonate a real firm to con you out of your cash – increasingly common. You can cross-check the phone number or email address provided by someone who contacts you with the FCA register to make sure they are who they say they are.
- Don’t be rushed and if in doubt, speak to a regulated financial adviser: High-pressure sales tactics – such as telling someone they need to invest by a set deadline – are a classic scam tactic and should immediately set off alarm bells. Do not be rushed into a decision you aren’t completely happy with. If you want help with your options or are unsure what to do, consider speaking to a regulated financial adviser or visit government-backed retirement guidance service Pension Wise. The FCA’s ‘ScamSmart’ website is another great resource to keep up to date on the latest tactics being deployed by fraudsters.
