Knowledge is power

At a time where it is becoming harder to save up adequate sums for retirement, the UK’s low interest rate environment is causing some retirees to turn to riskier pension and investment products which could potentially lose them a significant sum.

Many are also be taken advantage of by scammers. Read on to find out how you can protect yourself.

A risky business

A poll from the Financial Services Compensation Scheme (FSCS), shows that one in five people aged between 55 and 75 have been tempted to invest in riskier products than those they would ordinarily be comfortable with, lured by a higher rate of return. And, surprisingly, less than one in eight had taken financial advice to explore alternative options for making the most of their cash.

“Life-changing” losses

This has resulted in a rising number of people seeking compensation under the FSCS arrangements, said Chief Executive Caroline Rainbird. She commented, “The real danger is that if consumers choose to put money into high-interest pension and investment products that are not FSCS protected, they could lose life-changing sums of money from their retirement pots if the product provider fails.”

The FSCS survey is yet another example of research vividly highlighting the importance of seeking professional financial advice before investing in little-known, or risky, products. Advice from an expert can help you to explore and understand the risks before taking the plunge and putting your hard-earned money at risk.

Knowledge is power when it comes to your pension

Action Fraud reported a doubling of the average amount lost by pension scam victims in 2021 to £50,000 from around £23,689 in 2020, with the Pension Scams Industry Group (PSIG) estimating 40,000 people have lost around £10bn to fraudsters since 2015.

Worryingly, the Financial Conduct Authority (FCA), found that pension holders are nine times more likely to trust pension ‘advice’ from an online acquaintance than from a stranger they met face to face. To avoid losing your life savings, the FCA suggests ‘flipping the context’, and imagining what you would do if a stranger in the pub told you to put your pension into something they were selling.

The regulator is tackling scammers

It’s good to see that the FCA has introduced new measures to help in its commitment to tackle pension scams. From 30 November 2021, pension trustees and scheme managers received new powers to intervene. Previously pension providers were not allowed to refuse to carry out a pension transfer where the saver has the right to do so, even if they were suspicious, but the new regulations enable trustees to prevent a transfer request if they see evidence of ‘red flags.’

In a speech to delegates at the Pensions and Lifetime Savings Association at the time, the FCA’s Executive Director of Markets, Sarah Pritchard, said steps have been taken to stop scams reaching consumers and added, “We want people to be better protected from the risks of scams and know how to protect themselves against them. Our ScamSmart campaign… gives knowledge and tools to help people protect themselves from scams.”

How to be on-the-ball with your pension and avoid scams

Ask yourself some questions to protect yourself against potential scams:

• Have you been offered a free pension review out of the blue?
• Have you been guaranteed high returns?
• Have you been offered the opportunity to release cash from your pension under 55 years of age?
• Are you feeling pressured into a deal, for example with a ‘time-limited’ offer?
• Have you been offered an unusual investment opportunity (often unregulated and high risk)?
• Do you know who you are dealing with?
• Have you been asked for personal information that you wouldn’t share with a stranger?

If it sounds too good to be true, then it probably is!
So, or if you have doubts about any investment opportunities related to your pension, please get in touch with us, and we’d be happy to talk to you.

You can find out more about the FCA ScamSmart campaign here