Scammers take £2bn from pension savers in 2021

Pension scams have cost consumers more than £2m since the start of the year with the average loss topping £50,000, according to figures from the Financial Conduct Authority (FCA).

The regulator said the average loss to pension scams since the start of 2021 has been £50,949 - more than double the figure recorded in 2020 (£23,689).

The figures showed more than two-thirds (68%) of pension holders believed they were confident they could spot the signs of a scam but only 28% realised a ‘free pension review' offer was a classic scam indicator. It also found savers were nine times more likely to accept ‘advice' from someone online than a stranger in person.

AJ Bell senior analyst Tom Selby said the statistics were shocking but "in reality, this is the tip of the iceberg".

He explained: "Most scams occur outside of pensions nowadays, with retirement savers over age 55 who can access their retirement pot flexibly one of the prime targets for fraudsters.

"We also know that the coronavirus pandemic has led to an increase in vulnerability, with more than 27 million adults in the UK demonstrating characteristics of vulnerability such as poor health, negative life events, low financial resilience or low capability.

"Depressing as it is, scammers prey on this vulnerability to try to fleece people out of their hard-earned retirement savings."

He added: "While steps have been taken to protect pension savers, government and regulatory interventions can only do so much. It is vital individuals take responsibility, be careful before parting with their money and take the time to know the tell-tale signs of a scam."

Quilter head of retirement policy Jon Greer said: "Most of us are hardwired to ignore the ‘get rich quick' schemes we hear about in the pub, and we know to take any unsolicited face-to-face financial propositions with a pinch of salt. Yet when we go online, we are often lulled into a false sense of security and our instincts can go out the window.

The FCA's research suggests that all too often, people incorrectly assume they can trust what they see online to be genuine. They trust that because a pension ‘opportunity' appears on a website or a search engine that it must be the real deal. Often, however, it is a scam."

He added: "That's why the FCA's ScamSmart campaign is vital. Awareness is one of the most powerful weapons against scammers. Consumers need to be aware of the latest tactics used by scammers, and they need to be aware of the steps they can take to keep themselves safe and protect their hard-earned savings.

"Spotting a pension scam can be tricky and it is absolutely critical for savers to have their guard up when approached with an offer to transfer into unusual assets promising outlandish returns, or take advantage of a scheme offering early access."  

Greer said people consistently overestimated the extent to which they can spot a scam, and yet the FCA research showed that when pushed just two-fifths knew to be wary of pension transfer opportunities. 

"But it's not just fraudulent pension transfers that people need to be aware of. Millions have embraced pension freedoms with open arms, but when people take their tax-free cash it is often a pot of money bigger than they have received before, and often people will search online for what to do with it.

 "This is partly what's fuelling the rise in investment scams. In the year to May 2021, Action Fraud received 506 reports of pension fraud, with the reported loss estimated to be £8.1m. Over the same period, reports of investment fraud reached over 24,000 with over £630m lost.

 "And awareness alone is not the answer," said Greer. "Consumers need more protections from pension and investment scams when they go online. The way we regulate adverts in newspapers and adverts online are worlds apart. It's time the government added fraudulent online advertising to the Online Safety Bill so that technology companies face legal requirements to tackle the scams that appear on their sites."

First published by our sister title Professional Adviser