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How to spot a pension scam

Written by: Martin Tilley
New pension freedoms have led to a rise in the number of fraudsters targeting savers with elaborate investment schemes. Here are some tips to help you avoid becoming the next victim.

Figures released from the City of London police this month reveal that around £9m has been stolen from savers since the new pension freedoms allowed greater access to pension pots from April this year. This is around double the figure for the same period last year.

Scammers previously promoted their wares through self invested pensions but have now found this market much more difficult to access as a result of regulator intervention. They are now turning their attention to those aged 55 and over who can, subject to some tax charges, legitimately access their total pension savings.

Arguably the best way of identifying an investment opportunity that should be avoided is when it comes looking for you. These are investments looking for investors and which need to be sold.

‘Brainwashed’ salespeople

There are a huge amount of very savvy investors with a lot of investable cash who are looking for innovative new investments. Genuine investment opportunities do not need to be sold.  It is not a good sign if it is necessary to employ salespeople to promote the investment. Salespeople are not advisers and they have one objective: making you part with your money, which means a commission for them and a chance to move onto another punter.

The sales costs of course are also coming out of your money if you invest. But these salespeople are at best deluded, brainwashed themselves by persuasive training techniques that focus on the attractive headline features of the investment without themselves understanding the mechanics of how the return, if any, is going to be generated. At worst, and where they do have greater knowledge, they are conmen.

Free gifts

The art of the conman is to gain the trust of the victim but of course they must first obtain their leads. This might be through offering a free pensions review during which the age of the victim and the size of their available funds are investigated. Other methods include marketing offering a gift in return for registering your e-mail or other contact details and other personal information.

Their art is then to grab attention sometimes by inducing uncertainty about the victim’s current arrangements and then providing what appears to be an attractive solution. The sales patter is not only plausible but usually highly persuasive, and it can be all too easy to believe such a practiced and polished performance

Investment proposals are often abroad, where it is suggested less developed economies offer greater opportunities, but where it also likely that the victim will have little knowledge, nor be able to check and substantiate facts on their account.

However, not all non traditional investments are bad. Indeed some might offer the combination of return against risk that suits a particular individual. There are some safeguard steps that you can follow:

  • Check that the promoter is authorised and regulated by the Financial Conduct Authority. Their credentials can be checked on the register at Call them back on the number on the register for verification. The promotion of investments by unregulated salesmen are not screened for accuracy and they could be fabricated or embellished.
  • Ask whether their service offers access to the Financial Ombudsman Service, the arbitrator in disputes and complaints
  • Ask how the service is being remunerated. Remember there is no such thing as a free lunch.
  • Check if the investment is covered by the Financial Services Compensation Scheme, which might be able to offer redress for losses
  • Ask for a second opinion from a regulated financial adviser. They will have your best interests in mind. If the investment return and security look too good to be true a professional may be able to point out the pitfalls.

Above all else, remember that your money has likely been hard earned and should be protected from those looking to profit from your own endeavours.

Martin Tilley is director of technical services at Dentons Pension Management

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