KNOWLEDGE CENTRE

Pension Scams

Pension liberation also known as ‘pension loans’ and ‘pension scams’ is a transfer of a member’s pension savings to an arrangement that will allow them to access their funds before the age 55. Accessing pension savings before age 55 (the minimum pension age) is only possible in rare cases, like ill health.

This activity can be fraudulent                                       

An increasing number of companies are targeting members of pension schemes claiming that they can help them take their pension early. These companies may contact members in a number of ways including via email, social media and text messaging.

What is the possible impact?

Members are not informed, or are misled, as to the consequences of entering into one of these schemes. Pension Scams can result in tax charges and penalties of more than half the value of a member’s pension savings, and those being targeted are usually not being told about the potential tax implications. This is in addition to high charges, typically 20 to 30% for entering into one of these arrangements and high risk investments for the remaining pension savings.

The Pensions Regulator in conjunction with the Pensions Advisory Service has highlighted some of the warning signs to look out for. These include

  • Unsolicited text message or call
  • Targeting people with poor credit histories
  • Requests for personal information
  • The offer of ‘cash bonus’ or ‘mention of legal loopholes’ – if the offer sounds too good to be true, it usually is
  • Loans from scheme to members
  • Access to pension before age 55
  • Transfers overseas
  • No copy documentation – you should always be provided with the paperwork relating to the transfer, including full details of how your pension will be paid on retirement.
  • Member encouraged to speed up transfer – use of couriers or cash incentives to move quickly
  • The organisation is not registered or newly registered with HMRC.

This list is by no means exhaustive and members are advised to be vigilant.

The Trustee, together with the Kingfisher Group Pensions Department, has revised the KPS transfer process.

  • With immediate effect, transfer value information will only be sent to the member direct (even if the request has come via an Independent Financial Advisor (IFA) or third party).
  • Internal processes have been updated in accordance with the Pension Regulator’s guidance and check list.
  • If the Kingfisher Group Pensions Department, has any concerns they will write to the member direct, and if need be seek legal advice.

However a member wishing to transfer their benefits also needs to take care to avoid becoming a Pensions Scam victim.

  • Never give out financial or personal information to a cold caller.
  • Find out about the organisation’s background through information online. Any financial advisers should be registered with the Financial Conduct Authority (FCA) .
  • Ask for a statement showing how your pension will be paid at your normal retirement date, whether there are any tax charges, and question who will look after your money until you retire and draw your pension.
  • Speak to an adviser that is not associated with the deal you’ve been offered, for unbiased advice. You can find an IFA in your area via unbiased.co.uk.
  • Never be rushed into agreeing to a pension transfer.
  • Read the Pension Scam Member Leaflet.
  • Look at the ‘hooks’ and ‘hustle’ techniques scammers use and say, and what the real life consequences are. It also provides the top five tips on how to avoid being scammed and what to do if you’re not sure about what’s being offered or who to contact if you think you’re already a target. You can view the infographic by clicking here.