New Which? research finds that a third of over 55s have been contacted about their pension by companies that could be frauds, yet many aren’t sure they can spot a genuine investment and four in ten think they could fall victim to a scam.
Six weeks after the pension reforms came into effect, our research has found that a third (33%) of over 55s who aren’t yet retired have already been contacted by someone looking to sell them a potentially dodgy pension product.
The most common sales pitches were offers of investment opportunities (21%), a free pension review (16%), or offers to unlock your pension (13%) or access your pension pot early (13%).
Two in five (41%) of these were contacted in the months before the reforms began (between 1st January and 6th April 2015), which is double the number who said they were contacted in the whole of 2014 (20%). The most common way people were approached was by telephone (52%), but around a third received post (37%) or an email (36%).
With a rise in the number of people being contacted in recent months, people should be on their guard if they’re approached out of the blue and think very carefully before handing over any money. Worryingly, only half (50%) say they’d be able to identify a legitimate pension investment and nearly four in ten (37%) think they could be tricked into a scam.
Our Better Pensions campaign is calling for the Government and regulators to do more to increase awareness and prevention of scams and unregulated investment schemes.
Which? executive director, Richard Lloyd, said:
“Recent pension reforms have given people welcome freedom to access their money as they wish, but this has also made millions of pounds more accessible to scammers. Anyone who is approached by a company they’re unsure about should do some research into the firm and be careful not to rush into any decisions. We want the Government and regulators to do more to warn people about these types of tricks and do all they can to stamp out the sharks behind them.”
If you’re not sure if an offer is legitimate, follow the tips on the Which? Consumer Rights website on how to spot a pension scam:
- Look out for phrases like ‘one-off investment opportunities’, ‘free pension review’, ‘legal loopholes’, ‘cash bonus’, ‘government endorsement’.
- Alarm bells should ring if you are approached out of the blue over the phone, via text messages or in person door to door.
- Don’t agree to transfer your money overseas.
- Think carefully before believing promises to access your pension before 55 as this will incur heavy fees from the tax man.
- Don’t trust salespeople that won’t give you with copies of documentation, or encourage you to speed up the transfer of your money to the scheme.
- If you are unsure call The Pensions Advisory Service on 0300 123 1047, or if you have already accepted an offer you think may be dodgy, raise the alarm by calling Action Fraud on 0300 123 2040.
For more information on how to protect yourself against pension scams go to: www.which.co.uk/pension-scams
Notes to editors:
- In a separate investigation we posed as an investor to uncover the latest financial scams. We found examples of firms using a real investment company’s name with a slight variation to trade off their reputation, and companies encouraging people to invest in property – like a car parking space or a unit in a self-storage warehouse – which isn’t always regulated. If you’d like to see the full magazine article, please email firstname.lastname@example.org
- Methodology: Research Now interviewed 2,000 members of the general public in Great Britain, aged 55 or older online between 20th – 22nd April 2015. Data were weighted to be nationally representative.
- Our ‘Better Pensions’ campaign is calling for Government, pension providers and regulators to:
Establish a low-cost, high value drawdown provider, open to all consumers
Create a Government-backed “backstop provider”: In the same way as it created NEST to enable all consumers to save, the Government should lay foundations for a low-cost, high value Government-backed scheme for consumers to use in retirement. Once appointed, that provider should develop products that match consumers’ needs (e.g. by managing risk and volatility, offering low charges, and offering some flexibility so that members can adjust to changes in personal circumstances).
Default disengaged consumers into that provider: Should consumers not engage with their retirement decision, or should the market fail to provide real choice and good value, the Government should assess whether it could default consumers who don’t make an active choice to this provider.
Cap charges on drawdown so people can take money out gradually without having their savings eroded by fees
Introduce a charge cap: The Government should work with the FCA to introduce a charge cap for drawdown products sold by a customer’s existing provider where the consumer does not exercise an active choice.
Safeguard savings in drawdown schemes that go bust
Extend the Financial Services Compensation Scheme’s (FSCS) coverage of drawdown products: To avoid damage to consumer confidence in the event of a product provider going out of business, the Government should work with the FSCS to ensure greater protection is afforded to users of drawdown products as soon as possible.
Increase awareness and prevention of scams and sales of unregulated investment schemes: During 2015, the Government should focus its scams awareness outreach work on pension scams. The FCA should also step up its monitoring and enforcement activity against scams and the distribution of Unregulated Collective Investment Schemes (UCIS) and take action with industry to support consumer awareness.