Pension scams. Don't get stung.

Scammers are on the increase and they’re rubbing their hands with glee at the opportunities the new pension freedoms bring – don’t be a victim.

Scams targeted at over 55s

If you’re 55 or over, the new pension freedoms allow you to take some or all of your retirement savings as a cash lump sum. You can do whatever you want with the money but whatever you do, don’t let the fraudsters get their hands on it.

Scammers may try and persuade you to take a cash lump sum from your retirement savings and use the money to invest in a fraudulent scheme. They may even claim they can 'arrange' to take your retirement savings as cash.

Once you have your cash lump sum, the fraudsters may offer you tempting ways to invest your cash for example, investing in a new hotel in a far flung location, or car parking spaces in Taiwan.

But it isn’t just the exotic investments you should be wary of. Investments in the UK promising high or guaranteed returns should also sound alarm bells. Any investment offering over 8% return is likely to be bogus.

These fraudsters may seem convincing but if it sounds too good to be true, then it probably is.

Invest your cash unwisely and your money could be gone in a flash.

If you’re about to take your retirement savings, and want to know what to look out for, take a look at the government backed, impartial Pension Wise.

Scams targeted at under 55s

You can’t usually take your retirement savings before you’re 55. But these scams – sometimes called ‘pension liberation’ schemes - offer to give you access to your retirement savings earlier than the usual minimum age of 55.

These ‘schemes’ offer loans, cash payments and incentives to transfer your retirement savings. They often take high charges or fees, invest your money in risky investments and don’t warn you of the tax consequences.

Releasing some of your company or personal pension early can seem like an easy way to clear debt, and raising some much needed cash can seem an attractive option.

However, such plans can easily backfire.

Fees and tax can add up to a hefty 85% of the amount released. And don’t expect to be made aware of this before it’s too late to do anything about it.
An example – Dave’s sorry tale

48 year old Dave is short of cash and he knows he has pension savings of £20,000. If only he could get his hands on £6,000 of this money now.

And as luck would have it, out of the blue Dave gets a call from a company offering to get him access to his retirement savings – all he needs to do is transfer his pension and the company has recommended one. Dave is delighted. He’ll soon have £6,000, enough to cover his debts with a bit left over for a holiday in the sun.

He’s rushed by the company to sign the papers but Dave is only too happy to oblige.


What actually happens to Dave:

  • Dave 'liberates' £6,000 and looks forward to receiving this from the company.
  • Dave is charged a fee of 30% from the company - and that's 30% of the whole £20,000. So he has to pay £6,000 - the amount he 'liberated'.
  • Dave is then contacted by HMRC. He owes the taxman 55% of the whole £20,000. He needs now to find £11,000.
  • Dave may still have to find money to pay fines but he's already down £17,000.
  • Dave realises he has been well and truly stung.
  • And worse still, Dave has no retirement savings.

Warnings signs

Watch out if an individual or company:

  • Contacts you out of the blue about your retirement savings through a phone call, a text message, visiting you in person, or in some other way
  • Claims to be from the government or another ‘official’ source offering you an investment opportunity or how to get your hands on your retirement savings before you’re 55. Just hang up – you’ll never get a call like this from an official source
  • Encourages you to take out a large cash lump sum, or the whole of your retirements savings as, and to let them invest it for you
  • Uses words like 'pension liberation', 'loan', 'loophole', 'free pension review' or 'one-off investment', 'guaranteed returns' or 'high returns'
  • Offers you 'creative investments' that may seem unusual, describing these as 'unique', 'overseas', 'environmentally friendly', 'ethical' or in a 'new' industry.

How to protect yourself

  • Don’t be rushed into making a decision or signing anything – a genuine adviser won’t rush you.
  • Make sure the adviser is registered by the Financial Conduct Authority at www.fca.org.uk/register.
  • Look at the FCA’s Scamsmart warning list at www.fca.org.uk/scamsmart – this will tell you the names of investment schemes that are known scams.
  • If you’re about to take your retirement savings, and want to know what to look out for, take a look at the government backed, impartial Pension Wise.

How we try to protect you

To help protect our customers, we are taking extra precautions when dealing with a request to transfer a pension to another scheme that appears to be inappropriate.

We will:

  • Provide information, designed to alert customers to the dangers, made available by the regulators
  • Where possible, not allow transfers that may be inappropriate to proceed, steering the customer to regulated advice
  • Ensure our controls remain appropriate against developments in the marketplace
  • Not sell personal data to third parties. Zurich is committed to protecting your privacy. We use personal data to process your enquiries and to administer your plan.

If you think you've been targeted

If you have concerns over any approach you have received or suspect fraud, contact Action Fraud on 0300 123 2040

Help and support

We can't give you financial advice, but we're here and happy to help. Give the team a call on 0370 333 1500

Useful links

Zurich is not responsible for the content of external websites

Pension wise
The Pensions Regulator
HMRC
Pensions Advisory Service
Serious Fraud Office