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Pension transfers drop by a quarter

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Since the launch of pension freedoms in April 2015 there has been almost £80bn worth of pension transfers.

Despite the strong start, the total value of pension transfers fell from £10.6bn in the first three months of 2018 to £8.2bn in the second three. This marks the first quarter-on-quarter decrease in two years.

FCA pension campaign

The FCA and The Pensions Regulator (TPR) have launched a joint campaign to urge the public to be wary of cold callers. People have been warned to be suspicious when receiving unexpected offers regarding their pensions. They have also been offered advice on how to check that the person they are dealing with is legitimate.

This campaign follows recent statistics which showed that victims of pension scammers lost on average £91,000 each in 2017.

Scammers during 2017 used highly sophisticated means of conning people into transferring into fraudulent schemes. Victims of these pension scams lost their life savings and facing retirement with severely limited income.

One of the most common tactics used by pensions scammers is to offer a ‘free pension review’. An FCA survey showed that 12% of those aged between 45 and 65 would trust someone claiming to be a financial advisor when presented with the offer for a ‘free pension review’.

Whilst cold calling is by far the most popular tactic used by fraudsters, other tactics can include:

  • Contacting you about your pension via email or post without prior knowledge.
  • Offering unorthodox foreign investment opportunities which are not regulated by the FCA e.g. renewable energy schemes, foreign hotels, forestry.
  • Pressure to enter into time-limited offers.
  • Sending a courier with paperwork to sign.
  • Claiming that they will be able to grant access to pension funds before the typical age of 55.
  • ‘Advisors’ emphasising minimal risk and promising high returns.

Avoiding a scam

Four simple steps recommended by the FCA and TPR to avoid scammers are:

  • Check the FCA Register or call the FCA contact centre on 0800 111 6768 to check that the person you are dealing with is legitimate.
  • Reject unexpected pension offers.
  • Consider getting impartial advice.
  • Don’t make any rash decision about your pension – take your time to make a strategic decision.

Fraudulent advisors after completing a ‘free pension review’ will often recommend a pension transfer to a self-invested personal pension (SIPP).

Pension transfers and SIPPs – the dangers

SIPPs are not suitable for everyone.This is due to the higher degree of risk associated with them.

Returns with SIPPs may be lower than those shown on any forecast. They also often incur higher charges.

Referred to as ‘execution only’ accounts, SIPPs allow you to invest anywhere into anything. With this increased flexibility comes greater responsibility.

A SIPP pension plan is only advisable for those who have knowledge and experience of investing. SIPPS also require the time and patience to extensively research into potential investments.

The pension you receive from your SIPP is not guaranteed, if security of income is vital then a SIPP is not advisable.

If you’ve got a SIPP and you’re worried it could have been a scam contact us today. Our legal experts can give you a no obligation consultation to see if you’re eligible for compensation.