pension pot honey pot

If you are nearing retirement age, or know someone who is, it’s vitally important that you are always on the look out for pension pot scams.

Concerns over pension fraud have become so great that the government revealed plans to provide ‘better protection’ for savers in the most recent Queen’s speech.

The number of pension pot scams has doubled in the last six months alone, new Aegon statistics have revealed, with scammers adopting increasingly sophisticated tactics.

The government has vowed to increase the regulation of master trusts – where pension providers offer multi-employer schemes, looking after millions of people’s retirement savings in one place.

However, one of the pension types most vulnerable to fraud are SSASs – Small Self-Administered Schemes – and these are not going to be safeguarded any better under the new government initiative.

In fact, the risk to SSASs will likely increase, following a High Court ruling that pensions can be transferred to an occupational scheme without employer earnings being linked to the scheme. Previously, the Pension Ombudsman declared that an individual had to demonstrate earnings related to the scheme’s employer if they wanted to transfer their pension pot.

What are the main pension fraud risks to know?

Typically, fraudsters will pose as pensions advisers, cold calling people to invite them to transfer to a more competitive scheme. Therefore, pension holders should be vigilant about any telephone calls or text messages they receive out of the blue.

Many pension fraud victims do not realise that they face ‘double whammy’ loss as a result of being targeted. Accessing their pension before the age of 55 can contradict tax laws, leading potentially to a 55% tax penalty. Transferring their pension overseas to a country where they do not live can also have serious consequences.

Therefore retirees that fall victim to a pension a pension pot scams often face a huge tax bill on top their pension loss – which destroys their retirement savings.

How do I avoid pension pot scams?

The key to keeping your retirement savings safe is to do your research; if you get a random phone call with an offer that sounds too good to be true, then it probably is.

There are a number of things you can do to safeguard against pension fraud. Remaining skeptical is the first part – even if you receive an email where a friend has supposedly recommended a provider, check them out for yourself.

Additionally, check the Financial Conduct Authority (FCA) approved register to see if the adviser that has contacted you appears on the list. If they do not, find someone who does.

The FCA website is also a useful resource when it comes to viewing techniques for pension fraud. Make yourself familiar with the latest scams, to ensure that you do not get caught out. Overseas investment schemes are a real hot potato right now, so watch out if you’re approach to invest in a foreign vineyard or own a stake in a hotel.

An independent financial adviser is often the safest way to proceed when looking at how to manage either your own retirement savings, or that of someone close to you such as a parent.

Not being rushed into a decision is vitally important here. Some companies may give you limited time only offers, claiming that you will dramatically increase your retirement savings. Consider these types of incentives carefully, and don’t be afraid to turn them down if you feel that you’re being scammed.

When you need help with your retirement options, we can help you to explore your options and define a plan right for you.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

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