For Sue Flood, the shock of losing her pension life savings resulted in severe depression. Flood and her husband were scammed out of £230,000 between them, with the final loss still increasing.
She says being conned out of their savings deprived them of their future plans and as a result they are both still working past retirement age.
Unfortunately, this situation will be familiar to many people.
In 2023, more than £17.7 million was lost to pension fraud, according to the latest figures from Action Fraud, the national fraud and cybercrime reporting service. This huge sum was for 559 reports of pension fraud, equalling an average loss of £46,959 per person.
However, the money stolen is likely to be a lot more as people who are victims of pension scammers do not always report it. In fact, “most of us are at risk of becoming the victim of a pension scam”, according to a report from the Work and Pensions select committee published in March 2021.
Fallout for employers
“Employers should be very concerned about pension scams,” says Charles Cotton, senior policy and practice adviser on pay and reward at the CIPD. “If an employee is a victim of a pension scam, then the financial stress will affect their mental, physical, and financial wellbeing, and their work performance will probably suffer. This could then influence their decision when to retire, which has talent management implications for the employer.”
He adds: “Many employers contribute lots of money to their employees’ pension funds, not only to attract and retain employees, but also as a key part of the staff off-boarding process. If this money is scammed, then the employer will not see a return on this investment.”
Rashree Chhatrisha, reward director – pensions and benefits at Saga, says the issue is important as the consequences of scams can be more than financial. “It can seriously impact an individual’s confidence, mental wellbeing and even their wider relationships. By educating and raising awareness of potential scams, we [can help] to protect our employees and their money,” she says.
Wide range of scams
Pension freedoms introduced in 2015 gave people more choice in how they use their savings, including the ability to release funds early. However, by offering pension savers access to a much wider range of investments, the freedoms also opened up the risk of a much wider range of scams and financial fraud.
Chhatrisha says that with early pension release scams, most people won’t be able to access their pension savings before the age of 55 (rising to 57 in 2028). “There are a few exceptions – such as ill health – but withdrawing from their pot for any other reason can result in a significant tax charge,” she says. “Many people won’t know this, and scammers rely on this fact to lure them out of their savings.”
Pension reviews scams are another problem. “We had a few employees who received calls with the offer of a free pension review which might sound appealing but it’s often a scam, says Chhatrisha. “‘Companies’ offering the review will be trying to get scheme members to transfer their funds to a fraudulent scheme or high-risk investment.”
Free pension advice can be another entry point used by fraudsters. “The aim will be to get scheme members’ details or authority to transfer the fund and can be the first step to other pension scams,” Chhatrisha explains.
Tax charge risk
In the case of Sue Flood and her husband, Flood says that scammers set up Occupational Pension Schemes using HMRC’s online registration process.
She says: “These schemes were promoted via Financial Services Authority accredited individuals to the ‘man on the Clapham omnibus’ as personal pensions.”
But there was a huge difference between what was sold to them and agreed, and what happened. They were told that they could have some of their pension money early with no adverse risk or consequences.
The money from Flood’s defined benefit pension was going to be transferred and invested into a personal UK pension scheme, which, according to the scammers, would allow the early release of that capital.
However, the funds were moved into an Ark scheme, which meant it was put into a fraudulent land valuation rather than a low-risk pension scheme.
On top of this, because these schemes defrauded HMRC of pension drawdown taxes, Flood, and others, were taken to court where they were hit with tax charges of 55 percent of the pension fund amount.
Paul Sweeney, business lead at Pension Scams Action Group (PSAG), at The Pensions Regulator (TPR), says: “The threat of scams and fraud is ever-evolving, as scammers think of new ways to target savers.
“Following a joint intelligence assessment of the threat of pension scams undertaken by TPR and the National Fraud Intelligence Bureau, we issued a warning list.” (For full list, see heading ‘PSAG TPR risk list’, further down).
Employer action
But there is a lot employers can do to help prevent this from happening in the first place. They are very well placed to protect millions of workers, says Margaret Snowdon, chair of the Pension Scams Industry Group (PSIG).
“Employees need to be reminded frequently about the risk of scams, especially since despite the Financial Conduct Authority and the Pensions Regulator awareness campaigns, almost 50 percent of people would fall for a scam,” she says.
Ideally, employers should have a financial wellbeing strategy, says CIPD’s Cotton. “If they do, then educating employees about the risk of pension fraud should form part of this strategic approach.”
But he says that employers that don’t currently have a strategy can still do something to help. “For example, they can: work with their pension advisors and providers to offer education around this topic; send out alerts to people letting them know about the latest pension frauds; and in public areas, use visual aids to remind people about pension scams and the ways to spot them and avoid pension fraud,” he says.
Spot the key signs
Chhatrisha also says that the key to supporting employee education around the risks of pension fraud is about building awareness around scams and how to spot the key signs.
For example, scams can take the form of cold calling or any other form of unexpected contact, such as through text message or email, she says. Chhatrisha also highlights ‘phishing’ as another common tactic, saying this “can be the first step to scheme members revealing sensitive pension or other personal information”. To combat this threat, Saga’s IT teams educate employees about phishing emails and calls.
Further scam tactics can include creating a sense of urgency and high-pressure sales tactics, where employees are pushed to make quick decisions.
Pensions savers should also be wary of callers falsely claiming that they don’t need to be authorised, she adds.
This kind of employee education has an added bonus for the company, says Chhatrisha. “It will help to make them more cautious of potential threats to the business, too.”
Retirement ready
For Snowdon, it is especially important that employers consider offering guidance to those getting closer to retirement. Pension guidance can be from the age of 50 at the latest, and ideally free for employees, she says.
“[This will] prepare them to think about how they want retirement to be and warn them against scammers who will offer to help and then steal their savings.”
Snowdon is working on a pilot that would automatically set up pension guidance appointments, which the employee can choose to opt out of. She explains that the idea is to prove that employer nudges like this can make a big difference to employee outcomes.
Cotton adds: “While pension administrators and trustees must make certain checks to prevent a pension scam from happening, reward professionals have a role to play in trying to ensure that people are not tempted by a scam in the first place.
“Obviously, larger employers have more resources to do such things as: warning people about pension fraud on the organisation’s intranet; using interactive quizzes that help employees test their knowledge about pension scams; and offering access to an independent financial advisor who can help judge whether the employee is in danger of being scammed.”
He says smaller employers have a role to play too. “They can highlight Pension Wise to employees where they will find impartial guidance about retirement, distribute the leaflets produced by the FCA to help staff identify whether they might be in danger of being scammed, and encouraging those who identify that what they are being offered is a fraud to report it to the relevant authority, such as Action Fraud.”
Collective effort
Steve Watson, director of policy and research at NatWest Cushon, says that avoiding pension scams boils down to education and awareness. “And that’s the responsibility of all stakeholders, including members, employers, regulators and providers.”
He adds: “As scams become more sophisticated, it takes a collective effort to make sure people are informed and aware of any potential approaches, hacks, or scams that could cause them and their savings harm.
“Employers have the closest relationship to their employees out of this group and are well placed to help educate their staff about the potential risks involved with their pensions. Providers have an important job to help employers do this, and it starts by communicating with clear language that helps members identify potential scams.”
Transfer request hotspot
He explains that on top of that, providers have responsibilities and processes in place to protect against potential scams. “The main instance these protections come into place is during transfer requests. People may get frustrated when their pension isn’t transferred immediately, but it’s important to understand that there will be crucial checks going on behind the scenes to keep their life savings safe. These are serious amounts of money being handled and protecting consumers should be everyone’s number one priority.”
There are other times people may be more vulnerable to scammers. For example, with the upcoming launch of pension dashboards, many savers will see how much pension wealth they’ve accumulated in one place for the first time.
Watson says: “There is concern across the industry that this could create an opportunity for scammers to offer fraudulent services to help them access this potentially life-changing sum of money. It’s important employers and the industry engage with pension savers in the months ahead to help protect against potentially detrimental approaches.”
Change of mindset
For PSIG’s Snowdon, due diligence carried out by scheme managers before a transfer of retirement savings is clearly crucial. For best practice on this, she points to the Code of Good Practice written by PSIG, which she says has now been “partly strengthened by the (albeit flawed) regulations”. She adds that the ScamSmart campaign adverts and leaflets have helped, but adds that it is some time since they were refreshed.
“The best protection is where people become wary themselves when they are approached out of the blue with an offer or think about replying to a newspaper or social media advert. We need a ‘is this for real?’ public mindset,” says Snowden.
Following her experience, Flood has set up Fraud Victims United, a not for profit organisation, with Carly Barnes Short, a lawyer and the wife of a victim of investment fraud. “Our goal is to empower victims to navigate the complexities of fraud and rebuild lives with confidence, [and] most importantly lobby for the abolition of unjust tax charges on fraud victims,” says Flood.
Asked what more could be done to prevent this type of fraud in the future, she says: “We believe that top down systemic changes are essential to create a more resilient regulatory body and just system for fraud victims.”
She is still fighting for the return of her savings.
PSAG TPR risk list
From pension ‘liberation’ fraud to clone firms and scam schemes, the risks to be wary of are many, says TPR PSAG. They include:
- Pension-related investment fraud – where scammers entice savers into transferring their pension funds into unsuitable investments that may be false or high risk, with the promise of high or guaranteed returns.
- Pension liberation fraud – where scammers mislead savers into accessing their pension pots under the age of 55, unaware that they will incur a tax charge or potentially engage in tax evasion
- Scam pension schemes and providers – schemes and providers set up to deceive victims, which either don’t exist, or exist but are committing fraud
- Clone firms – scam schemes and providers using cloned websites and impersonations of existing legitimate brands to facilitate fraud. The Financial Conduct Authority maintains a growing list of clone firms.
- Secondary scamming is also on the rise. This is where those who were already victims of a scam are given false offers to help them get their money back, leading to more devastation and deeper despair for victims
- Charging of high fees – this is where savers are persuaded into transfers that result in excessive costs and fees, often layered through unnecessarily complex business structures.”
Scammers prosecuted
Not all scammers evade justice. PSAG’s Sweeney highlights the case of fraudsters Susan Dalton and Alan Barratt who were successfully prosecuted by TPR in 2022 for their part in a £13.5 million pension liberation scam.
He says: “The criminal operation they were part of lured 245 pension savers into accessing and transferring their pension savings into fraudulent pension schemes. Dalton and Barratt were jailed for a total of more than 10 years in April 2022, and, following an investigation by TPR, the pair were back in court in January 2024 under the Proceeds of Crime Act.”
TPR PSAG advice for employers
“We recommend employers signpost employees to MoneyHelper, the government-funded money advice service, which offers free, impartial information and guidance,” says Sweeney. “MoneyHelper offers specific guidance on how employees can protect themselves from scammers when making decisions about their pensions:
“Employers with DC pension schemes for their employees can signpost employees over 50 to MoneyHelper’s Pension Wise, which offers appointments to talk through their retirement options.
“Employees can also be directed to Action Fraud for advice on how to protect themselves from pension scammers. For tips on how to protect themselves, families and friends from all types of fraud, employees can be signposted to the StopThinkFraud website.
TPR PSAG advice for pensions savers
Protect yourself
“Stop and think. Reject any unexpected contact and avoid hasty decisions. If you get an unexpected call, text or email about your pension, it is safest to ignore it. Reputable firms will not contact you about your pension out of the blue,” says Sweeney
“Always check who you are dealing with. Never take advice from the company that contacted you. You can check if you are dealing with an authorised firm or adviser on the Financial Conduct Authority’s register (FCA).
“You can get free, impartial information and guidance regarding your pension from MoneyHelper, the UK government-funded money advice service.
“For tips on how to spot scams and protect you, your family and your friends from fraudsters, visit the StopThinkFraud website.
What to do if you think you’ve been scammed
“If you believe you have been scammed or are suspicious, contact Action Fraud online or by calling 0300 123 2040. In Scotland, call 101,” says Sweeney.
