.jpg)
When Pauline Padden received a text, offering a cash bonus to transfer her pension pot into a high-return investment, it felt like the answer to her prayers.
The hard-working critical care nurse was about to turn 50 and was looking after her terminally-ill mum, so she decided to accept the offer to move money from her workplace pension to secure a better future.
“I spoke to a salesman for the scheme. He came across as being really helpful and genuine,” says the mum of three from Merseyside, now 60. “Convinced by his pitch, I moved funds from one of my workplace pensions into the scheme.
“My cash reward was received as promised, and I was so happy I later transferred a second pension pot.”
But a year later Padden got a letter from an independent trustee of the pension scheme, who’d been appointed by The Pensions Regulator to review the investments, explaining she’d been the victim of a scam. She’d lost £45,000.
Padden was doing all she could to provide security for herself in retirement and now she can’t afford to give up work.
“I’ve been left high and dry,” she says. “While friends and family talk about retiring I will probably have to keep working until I’m no longer fit to do so. When I think about it, I get panicky.”
Padden discovered she was one of more than 200 people who were persuaded to hand over their pension savings to fraudsters with the promise of cash bonuses and gift vouchers.
The Pensions Regulator prosecuted, and the fraudulent pair were jailed, but it's unclear how much money will be returned to those defrauded.
Early release pensions: Scammers will often try and tell you that they can help you access your pension before the age of 55, often with a loan or ‘tax-free’ cash sum. Watch out for phrases like ‘pension loans’ or ‘pension liberation’.
If you’re approached about releasing a pension early, be very wary – there are very few reasons you’ll be able to do so without incurring a high tax cost.
Make sure you get proof of any credentials of the company involved and insist they explain all options available to you, not just pension release.
Fraudsters can not only charge you a substantial fee for your ‘loan’ or cash, but you may also face a tax bill of 55% on your withdrawal from HMRC for accessing your pension early.
The remaining funds will either be stolen by the scammers or transferred into high-risk investments, often overseas.
Pension review scams: With these scams you’ll be approached with the offer of a ‘free’ pension review. Should you accept this, you may be encouraged to transfer your pension into a higher risk scheme, investing in non-standard assets like overseas property, bio-fuels, storage units – even care homes – for high, or ‘guaranteed’, returns.
Unfortunately, as these pension scams are sold as long-term investments, victims may not realise they’ve been scammed until they try to access their money years later.
Red flags: The giveaway for these scams is that pensions cannot be accessed early (unless you are in poor health or under very specific other conditions) without heavy tax penalties, and that legitimate, regulated businesses will not offer pensions advice free of charge.
The threat of scams is so serious that the Pension Scams Action Group (PSAG) has been set up to tackle them, bringing together government bodies, representatives from the pensions industry and law enforcement agencies.
Mike Broomfield, Head of Intelligence at The Pensions Regulator, says pension scams are becoming even more sophisticated.
“From March 2023 to 2024 there were 473 reports of pension scams. That’s what we know of. If you think you’ve been scammed, we want you to report it to Action Fraud so we can assess what you’re telling us and help you,” he says.
“If you fall victim to scams, you can lose a lifetime’s savings in a couple of seconds. We’ve seen scammers clone websites of reputable firms and if you don’t do your homework, and check if they’re legitimate, you could end up losing money.
“Scammers are shapeshifters, they’re smart and they’re always one step ahead.”
Being savvy is key when it comes to protecting yourself against pension scams, as they can be highly complex – as such, there are several red flags you should look out for.
Firstly, cold calls about pensions are illegal – and that covers emails or texts too. “Cold calls shouldn’t happen, so put the phone down as soon as you receive one,” says Broomfield.
“The real difference we’ve seen over the years is a shift to cyber fraud. If a company contacts you on social media or by email, it’s the same as cold calling: it’s illegal, so don’t engage.
“A reputable firm will not call you out of the blue and ask you whether you want to transfer your pension funds. Really do your homework and check if the company you’re dealing with is FCA registered.
"The Money and Pensions Service (MaPs) and MoneyHelper are good places to go for free, impartial advice. Pause and think about what you're doing and if you're uncomfortable, don't take any more communication from the people who are calling you.”
.jpg?sc=max&mw=800&h=450&la=en&h=731&w=1300&hash=A17F361A6D51309C41BBCFDDF2BE0600)
“[Scammers] create a really attractive proposal,” says Broomfield. “Some of the things we see... you wouldn’t know they’re a scam.
“Pension scammers are very plausible. We know that they're charming and knowledgeable about what they're doing – and they can take people on a journey where they familiarise themselves with that person, get to know them and appear to be a friend.
“That’s how they entice them into making that investment. It’s even more devastating if you find you've put your trust in someone and then you've lost your pension.”
At the time of writing, most people can start taking money from their pension once they reach the age of 55 (rising to 57 in 2028) and up to 25% can be taken tax-free. Scammers have their eye on this, so Broomfield points out you need to be vigilant.
“The promise of high returns should raise suspicions. High fees and charges are another thing people fall victim to, even if there’s a legitimate-looking investment offered. Look out for red flag phrases such as ‘loophole’, ‘cash bonus” and ‘one-off investment,’” says Broomfield.
Another thing to think about is where your supposed investment is going. “Watch out for overseas investments. If you’re not investing in a blue-chip FTSE company, what are you investing in? It may be high risk,” he adds.
Take the time to make the right decision, rather than rushing in, particularly if a scammer tries to persuade you that the offer only stands for a limited time.
“We’ve seen examples of people with quite substantial pensions, maybe wanting to get some money out of it to support a business, so they make decisions in relatively quick time and then end up regretting it,” says Broomfield.
“Talk to relatives as well. That's always a good way of checking whether you're about to do something that you might regret.
“There are also red and amber flags in place, so if administrators, providers or trustees suspect a scam or think one of their savers is being targeted, they can raise a red flag to stop the transfer.”
However, while there are processes in place if your pension transfer is suspicious, you shouldn’t rely on these to avoid being scammed.
Look at as much background information as you can on the company running the scheme and seek independent advice if you have any worries before making any commitments.
Scam Smart, a service from the Financial Conduct Authority that helps people spot pension and investment scams, has more information on red flags to look out for, and if anything causes you to feel wary or unsafe, report it immediately.
It’s hard to recover money from a pension scam, particularly as you might not even know you’ve been the victim of it for years, by which time the company might have disappeared. But the first step to take is report it to Action Fraud and contact MaPs.
(Action Fraud is run by the City of London Police and is the first place to go if you think you’ve been scammed. Not only might you be saving yourself heartache, but you’re helping others too.)
“MaPs is really helpful for people that have been scammed. They’ll give you an interview and help you rebuild [your] retirement, looking at what options are available to support you through that journey,” says Broomfield.
Worse still, victims may be targeted again, where fraudsters pretend to help you recover the money you lost.
“We have seen cases of recovery fraud, where someone’s already lost their money to scammers, who share their details with others,” he adds.
“Then a nice, helpful person will give them a call and offer them the chance to get their money back. That’s horrendous because you’re paying out more money and lose that as well.”
“A legitimate claims management company won’t ask for money upfront – they’ll only take a fee if they can get you your money back.”
Money and Pensions Service and MoneyHelper
Find out how to protect yourself from scams that promise big returns but are really just targeting your money.
Our practical guide covers types of care, costs, CQC ratings, and visiting tips.
Find council tax discounts and reductions, how to appeal your band, and how to manage your payments
.jpg)
