Protecting your pension from fraud this festive period

10 December Reading Time: 5 minutes

The Christmas period is usually a time for celebration, generosity and goodwill – that said, annual festivities can sometimes come at a high cost to pension savers. With the big day now less than 20 days away, most Britons will have much of their Christmas shopping underway, which can have enough of an impact on their personal finances. Adding to this, unfortunately, is the fact that scammers and pension fraud tend to be rife throughout the festive period.

To make matters worse, it was reported that the general state of affairs with pension scams has worsened, as average losses from fraudulent activity have more than doubled the typical figure reported last year. Back in July, complaint data from Action Fraud showed that the average loss this year so far had been a staggering £50,949, compared with £23,689 in 2020.

As such, pension planners would benefit from taking the necessary steps to protect themselves from losing their retirement savings so as not to dampen the festive spirit.

Here are some things to consider…

Understanding fraud

First and foremost, Britons must be aware of the common types of pension fraud and how they work to avoid falling prey to fraudsters.

Savers should be in the know about early pension release scams, which offer to help them release cash from their pension before they are 55. This may also be referred to as a ‘pension liberation’ or a ‘pension loan’, as it is often claimed that savers can ‘borrow’ money from their pension pots.

In this case, individuals are typically contacted out of the blue, via telephone, email, or even post, and funds are transferred from their legitimate pension to a scheme set up by the scam, which is usually based overseas.

At least, generally speaking, pension planners can only take money from their funds when they are 55 or older, except in certain exceptional circumstances. Otherwise, they could face lofty tax bills of 55%, as well as other additional charges on withdrawals. In the worst cases, savers may even risk losing all their money.

Savers should be equally conscious of pension review scams, which target savers by offering free pensions reviews – again, these fraudsters tend to operate by telephone calls, emails, text messages, and even advertisements on search engines.

Although the prospect of a free pension review may not seem too nefarious, all is not as it seems. Often, these companies are not regulated by the Financial Conduct Authority (FCA) even though they may claim to be – some scammers may also operate on the pretence that they are from the Government’s guidance service, MoneyHelper.

However, these scammers are not to be trusted. Their aim is to persuade individuals to transfer their hard-saved pensions into high-risk schemes, where their pension funds are invested in unfamiliar investments. Scammers will make big claims about the returns and cash sums promised by such investments. Because some of these scams are promoted as ‘long-term investments’, it may even be years before an individual realises something is amiss.

Staying diligent throughout the festive season

In short, most savers should be aware that taking cash from their pension before they reach the age of 55 is unlikely to be in their best interest. This is equally the case with unsolicited calls offering pension reviews or unregulated advisers – good things rarely come from these unexpected interactions. As such, individuals must ensure that they stay vigilant and do their due diligence on any companies or advisers offering free services.

Throughout the Christmas period, savers should be aware of some tell-tale signs: cold calls, as well as unsolicited text messages or emails, are usually a giveaway. In fact, a ban on cold calling about pensions came into place in January 2019, so this is something to bear in mind.

Likewise, pension planners should never feel rushed into making any rash decisions about their pension or giving over their personal bank details – particularly over the phone. So, it would be wise to take ample time to research any new potential pension schemes. Checking up on a company’s credentials on the FCA register would be a wise decision in this regard and reporting any suspected fraudulent activity to the FCA’s ScamSmart.

As is generally the case in life, if something sounds too good to be true, then it usually is. While it is sometimes possible for pension schemes to offer a significantly higher than average income than offered by other providers, this is rarely the case. If in doubt, individuals should seek advice from a registered independent financial adviser – doing so could save their retirement.


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