Pension Scams: How to Spot Them

How pension scams work

Pension scams take various forms, but they typically involve persuading you to transfer your pension to a fraudulent scheme or invest your pension savings in high-risk or non-existent investments. The end result is the same: you lose some or all of your retirement savings, and you may also face an unauthorised payment tax charge from HMRC of up to 55 percent.

Since the pension freedoms were introduced in 2015, giving people greater access to their pension savings from age 55, scammers have found new ways to target pension holders. The FCA and The Pensions Regulator have worked together to raise awareness through campaigns, but scams continue to evolve.

Common types of pension scam

• Pension liberation fraud: Scammers offer you access to your pension before the minimum pension age, often claiming to use a legal loophole. There is no legal way to access your pension before 55 (57 from 2028) except in cases of serious ill health. Any offer of early access is almost certainly a scam.
• Investment fraud: You are persuaded to transfer your pension into a scheme that invests in unusual assets such as overseas property, carbon credits, forestry, ethical investments, or storage pods. These investments may not exist, may be vastly overvalued, or may simply be vehicles for the scammers to extract fees.
• Clone firm scams: Scammers set up firms that closely mimic legitimate, FCA-authorised firms. They use similar names, copy website designs, and even use the real firm's FCA registration number. You believe you are dealing with a regulated firm when you are actually dealing with fraudsters.
• Free pension review scams: You receive an unsolicited offer of a free pension review, which leads to a recommendation to transfer your pension to a new scheme or product. The new scheme charges excessive fees or invests in unsuitable high-risk assets.

Warning signs of a pension scam

The FCA has identified several key warning signs that should make you suspicious:

• Unsolicited contact: Cold calls about your pension have been illegal since January 2019. Any unsolicited phone call, text, email, or social media message about your pension is a major red flag. Legitimate pension advisers do not cold-call potential clients.
• Pressure to act quickly: Scammers create urgency by claiming limited-time offers, closing deadlines, or saying you will miss out if you do not act immediately. Legitimate pension advice is never rushed.
• Guaranteed returns: No legitimate investment can guarantee returns. If someone promises guaranteed high returns from pension investments, it is a scam. Even the safest investments carry some risk.
• Free pension reviews: While some legitimate advisers offer free initial consultations, unsolicited offers of free pension reviews, particularly from firms you have not heard of, are suspicious.
• Unusual investments: Be very cautious if you are encouraged to invest your pension in overseas property, storage units, carbon credits, biofuels, forestry, or other exotic assets. These are common vehicles for pension fraud.
• Complexity and jargon: Scammers often use complex language and obscure financial jargon to make their schemes sound legitimate and to prevent you from asking too many questions.
• Cashback or bonuses: Offers of cashback, bonuses, or upfront payments for transferring your pension are a strong indicator of fraud. Legitimate pension providers do not offer cash incentives for transfers.
• Help accessing pension before 55: Any claim that there is a legal loophole allowing early pension access should be treated as a scam.

How to protect yourself

Check the FCA Register

Before engaging with any firm that offers pension advice or investment services, check the FCA Register at register.fca.org.uk to verify that the firm is authorised. Be aware of clone firms: check the contact details on the FCA Register match those of the firm contacting you, and contact the firm using the details on the Register rather than those provided in the communication you received.

Check the FCA Warning List

The FCA maintains a Warning List of firms that are known to be operating without authorisation or that are suspected of running scams. Check any unfamiliar firm against this list before proceeding.

Never respond to unsolicited contact

If you receive a cold call, text, email, or social media message about your pension, do not engage with it. Do not provide any personal or financial information. Report the contact to the FCA and the Information Commissioner's Office (ICO).

Take your time

A legitimate pension adviser will never pressure you into making a quick decision. Take time to research any firm and any recommendation before committing to a pension transfer or investment. Discuss significant pension decisions with a family member or trusted friend.

Use legitimate channels

Find a pension adviser through reputable channels such as the FCA Register, personal recommendations from people you trust, or matching services like Nesto that verify adviser qualifications and FCA authorisation. Do not rely on online advertisements or social media promotions.

Be sceptical of high returns

If an investment opportunity sounds too good to be true, it almost certainly is. Legitimate investments carry risk, and higher returns always come with higher risk. Any investment promising consistently high returns with no risk is fraudulent.

What to do if you think you have been scammed

If you believe you have been targeted by a pension scam, act quickly:

1. Contact your pension provider immediately: If a transfer is in progress, your provider may be able to stop it.
2. Report to Action Fraud: The UK's national fraud reporting centre at actionfraud.police.uk or by calling 0300 123 2040.
3. Report to the FCA: Report the firm or individual to the FCA through their online reporting form.
4. Contact The Pensions Regulator: If the scam involves a pension scheme, report it to The Pensions Regulator.
5. Seek legal advice: If you have lost money, a solicitor specialising in pension fraud may be able to help you recover some or all of your losses.
6. Check your tax position: If your pension has been transferred to an unauthorised scheme, HMRC may impose an unauthorised payment tax charge. Seek tax advice as soon as possible.

Regulatory protections

Pension providers now have additional powers to block suspicious transfers. Since November 2021, pension schemes can refuse or delay a transfer if they identify red flags such as the presence of overseas investments, unregulated advisers, or signs of pressure or fraud. If your pension provider raises concerns about a transfer you have requested, listen carefully to their reasons rather than viewing it as obstruction.

If you receive bad advice from an FCA-regulated adviser and suffer a financial loss as a result, you may be able to claim compensation through the Financial Ombudsman Service or, if the firm has gone bust, through the Financial Services Compensation Scheme (FSCS), which covers claims up to 85,000 pounds.

The bottom line

The golden rule is simple: if someone contacts you out of the blue about your pension, it is almost certainly a scam. Legitimate pension advisers do not cold-call. Always check the FCA Register, never rush into a decision, and if something sounds too good to be true, it is. When you do need pension advice, use a verified, FCA-regulated adviser found through a trusted source.