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The New Pension Scam and How To Avoid It

It’s a sad fact that those of us that have saved up to support ourselves in retirement by saving for a pension is often the target of scammers, both at home and abroad. Of course, the authorities have been trying to fight the number of pension scams for some time, which only gets harder to do as the scams evolve.One of the best ways to protect yourself against scam and mis-sold pensions is to learn a little bit about how to spot them. So, here’s how a Third Generation pension Scam works, and how you can avoid it.

Old Vs New Pension Scams

As more people become aware of pension scams and how they operate, some scammers have upped their game.Just a few years ago, people were receiving cold-calls and being told to transfer into SIPP pensions, investing in high-risk stuff like overseas property schemes and forestry projects, without being fully informed about the risks involved. This often resulted in people losing huge chunks of their pension, especially in circumstances where they were unable to make a claim. But both the FCA and many pension savers got wise to this, forcing the scammers to change the rules of the game yet again. So some began disguising the high-risk investments in bonds.

High Risk Investments In Disguise

Much of the scamming model has remained the same – it usually starts with a cold-call to the intended target, and it may involve a “free pension review”. From then, SIPP pensions (as well as SSASs and QROPSs) are often still the destinations – more flexible pensions that can often hold high-risk investments. But here’s the difference: instead of directly offering more obviously risky investment in something like overseas property, the investment is ‘wrapped’ in a bond, with a friendly sounding name that doesn’t hint at the high-risk nature of the investment lurking underneath – an extra layer of disguise.


Let’s use an analogy to explain suitability and how negligent or even “scammer” financial advisers sometimes work. Let’s say you want a chocolate bar, but you have a nut allergy. Of course, you wouldn’t want a chocolate bar with peanuts in – it would be unsuitable for you. But the guy selling the chocolate bars is overstocked with peanut flavoured bars, or maybe makes a bigger profit if he sells those bars rather than plain chocolate. So, he cleverly takes a chocolate bar with nuts in and wraps it up in a plain chocolate wrapper, so you make the purchase. What happens later? Well, it could cause you damage, and make you feel like you’ve been had, but by that time, our chocolate bar seller has disappeared off into the night… Well, that’s sort of like disguising a high-risk investment so people who aren’t suitable would unwittingly push their money into it.

How to avoid a pension scam.

  • Information is power – get to know your pension arrangements, including where your money is invested and how it is supposed to pay a return. Be on the lookout for any investments that aren’t regulated by the FCA, or are based abroad – they may be higher risk than you thought.
  • Avoid cold-calls: we hope these will become less now that tougher data protection laws have come into effect, however scammers will still try to find a way to contact you. Free Pension Reviews can sound good, but they will often be far from unbiased as they look for places to put your pension that pay them the commission.
  • Find a reputable and regulated financial adviser – Always seek independent financial advice, and check your adviser out using the FCA register (free to use).
  • The Golden Rule: If it sounds too good to be true… you know the rest. Keep your head screwed on, and be on alert for high-pressure tactics like playing down your old pension, posing the new arrangement as a limited time only offer, and anything aggressive or biased.

Keep your retirement plans safe, and if you get into trouble, don’t take it lying down.
Tom Iveson is the Content Manager for Get Claims Advice where he covers topics related to SIPPs and mis-sold pensions

Peter Christopher

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