Five signs you may be talking to a pension scammer

10th December 2014


Following an article by the editor of Mindful Money John Lappin giving his view of some of the risks arising from the pension reforms, the chief executive of the Pensions Advisory Service Michelle Cracknell got in touch to outline her five key points about how to spot a potential scamming firm.

The list is informed by the experiences of TPAS which has been dealing with inquiries from from savers and investors on their helpline and website for many years, though the organisation saw a big spike in inquiries following the Budget announcements of the pension reforms.

She warns that the firms will be targeting pension investors coming up to 55 urging them to invest in all manner of inappropriate schemes. None will necessarily be illegal and regulators may find it difficult simply to stop them so she wants to equip the public with as much information as possible.

Here are her five key things that should make consumers think twice before freeing up and investing pension money though many of the lessons apply more generally to dealing with financial firms.

1. Make sure there are not too many layers of companies involved

Beware of layering or an investment which involves lots of different companies. When you are going into a financial transaction, find out how all many companies are involved. The more there are, the more suspicious you should be. On some forms of scam, you may get at least three companies and sometimes five or six companies. That layering should make you concerned. With lots of companies, if it does go wrong, it will be much harder to find out who did you down.

2. If someone calls you, always call them back

When somebody phones you up always take their number and call back. The Department for Work and Pensions recently brought it to TPAS’ attention that somebody was using our logo. When we phoned them, the response we got was so unprofessional and unfriendly, it was obvious they never received inbound phone calls. We said “We are phoning you up because our friend has passed on a flyer about you”, and they said “who are you?” We said “We were just phoning up about the flyer”, and they said “Where do you work?” If a financial services company phones you, a really good tip is to always phone them back because any reputable company will always want to take your all and always phone you back”.

3. Check the Financial Conduct Authority register

Look on the FCA register to see if the firm is regulated. It is not fail safe. But you will know if you are dealing with an FCA regulated firm. It is also good to look at the HMRC list too on QROPS pensions dealing with transferring pensions overseas.

4. If the words Government, guidance or review are mentioned by a caller be suspicious

The two most common phrases used by a scammer are ‘have you heard the Government are’ and then the words ‘you are due your annual review’. Watch out for mentions of Government, guidance and review – the official guidance guarantee is not in place at the moment so it is not even available yet.

5. Check any rate of interest to see if it is credible and watch out for promises it is guaranteed

Think whether the interest promised makes any sense. With most investments these firms are talking about they use the word ‘guarantee’. So we are hearing on our helpline 8% guaranteed from this property investment. In that case be very wary. Somebody calling our helpline said they had heard interest offered at 12%. That worries me less. People might start saying that sounds a bit high. But eight per cent, people still remember the days of higher interest rates. But if a high rate with a guarantee is offered be very careful.

TPAS is an officially designated provider of the Government’s Guidance Guarantee, which will offer help with retirement decisions, but that does not come into force until April with the Treasury due to publish the details of how it will operate soon. Michelle would like us to stress that the views expressed are from TPAS as it is currently constituted and operates.

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