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Pension savers vulnerable to scams as cost of living escalates

In the UK the Financial Conduct Authority (FCA) is warning that scammers are using a number of tactics to con victims.

The cost of living crisis is helping criminals persuade vulnerable pension savers to part with their money in the hope of better returns

Fri Oct 28 2022 - 00:00

The high cost-of-living concerns could drive some pension savers into the clutches of criminals promising them better returns on their money – according to a survey by the FCA.

A quarter (25 per cent) of people said they would consider withdrawing their pension savings earlier than planned to cover living costs, potentially making them vulnerable to scams.

The Financial Conduct Authority (FCA) is warning that scammers are promising victims a better lifestyle in their later years. It also warned that if a consumer deals with an unauthorised firm, they will not be covered by the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if something goes wrong.

The FCA commissioned a survey of more than 1,000 people aged 40 and over with workplace and private pensions. More than two-fifths (44 per cent) would take up the offer of a “free pension review”, despite this being a warning sign of a potential scam.

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It concluded that concerns about having enough money to last throughout their retirement may make people vulnerable to the lure of boosting pension returns.

It found that many would be reassured if a potential scammer could show them third-party verification, despite how easy it to produce fake websites and brochures to make the con appear authentic.

More than half (54 per cent) of those questioned said they did not feel confident about how to grow their pension pot, and 38 per cent did not fully understand how pensions work.

The FCA said that, in one case, a 58-year-old woman lost £45,000 in pension savings. She was looking after her terminally-ill mother when she received a text offering a better deal on her pension and some cash in return for transferring her pot.

She was promised higher returns on her pension savings if she invested in a hotel build in the Caribbean. Six months later, she was devastated to find out she had been the victim of a scam.

She said: “I was only trying to make my retirement easier but instead these scammers ruined my life. I still don’t know if I’m ever going to be able to get my savings back and will probably have to keep working until I am no longer fit to do so.”

Mark Steward, executive director of enforcement and market oversight, FCA, said: “The rising cost of living is affecting people at all savings levels, and pension scammers are taking advantage of this.”

Some common tactics used by the criminals include the offer of a free pension review where they will guarantee better returns on pension savings, being offered help to release cash from a pension, even though the person is under-55, high-pressure sales tactics involving “time-limited offers”, unregulated and high risk investment opportunities and long terms pensions investment opportunities, which mean it could be several years before the victim realises that something is wrong. PA

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