The Pensions Regulator has declared war on scammers with a new three-pronged strategy to protect savers from predators and punish criminals found guilty of participating in fraudulent activity.
The scheme reportedly aims to educate pension trustees and savers on the threat of scams, stop practices which might harm retirement outcomes, and fight fraud via the prevention, disruption and punishment of criminal parties.
The Regulator said it launched the strategy to tackle the fresh wave of scammer activity amid the cost of living crisis, with spiking inflation and the rising energy price cap this autumn leaving a growing number of UK households at risk of fraud.
“The last two years have already been incredibly difficult for millions of people, with Coronavirus and lockdowns taking a massive toll on people’s physical and mental wellbeing, including their financial health in some cases. On top of this, the cost-of-living is rising rapidly, with the energy price cap set to surge yet again later this year,” said AJ Bell head of retirement policy Tom Selby.
“All of this means millions of Brits face being on or near the financial precipice in 2022. Depressingly, this is a perfect environment for scammers to thrive.”
The soaring cost of living crisis has led many people to seek urgent measures to make ends’ meet, with credit card borrowing surging as families eat into their savings and into debt in desperation to put food on the table.
The desperate situation unfortunately provides a ripe harvest for criminals to reap, at the risk of immense consequences for vulnerable pensioners and savers.
“Unscrupulous fraudsters will attempt to take advantage of vulnerability through any means possible, from offering ‘early access’ to pensions to pushing dodgy investments promising sky-high, guaranteed returns,” said Selby.
“Offers such as these might be particularly tempting to people experiencing inflation on the brink of double-digits.”
“However, the reality is that, unless you are in serious ill-health, accessing your pension early will lead to a huge tax penalty from HMRC, while being lured by the promise of sky-high investment returns from a scammer could see you lose everything.”
The Pensions Regulator’s new strategy has been met with a warm welcome, with its effort to spread intelligence and launch new preventative protections lauded as essential in the current economic environment.
“Regulators are right to get on the front foot on this and the vast majority of the pensions industry stands ready to help educate customers about the risks,” said Selby.
“It is particularly positive TPR is taking steps to improve intelligence sharing and testing new scam prevention solutions. It is vital firms share any concerns they have about schemes, firms or individuals with the relevant authorities, and vice versa, to ensure as many savers as possible are protected.”
How to avoid fraudulent activity
AJ Bell shared five tips to avoid scam attempts, including to hang up if an known party contacts you to discuss your pension, don’t associate with unregulated so-called advisors and don’t entertain prospects of “sky-high” investment returns from overseas or crypto opportunities.
“While telephone, text, email and social media remain the primary weapons of choice for the modern con artist, some continue to knock on doors; usually targeting older people they think are more likely to be vulnerable,” said Selby.
Additionally, don’t listen to schemes offering “guaranteed” returns, and don’t rush into a decision linked to your pension without absolute due diligence.
“Nothing, and I mean nothing, is guaranteed when it comes to investments. If a company you’ve never heard of says it can deliver GUARANTEED returns of any amount, don’t touch them with a barge pole,” said Selby.
If you are unsure about an investment or an advisor, check the Financial Conduct Authority’s (FCA) ScamSmart website, or talk to a regulated financial advisor about your situation.
