The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have carried out research which suggests that a high proportion of consumers would make a decision within 24 hours about whether to accept a new pension investment opportunity.

The average victim of a pension scammer lost £82,000 in 2018, and the FCA says that the average pension saver would take 22 years to accumulate that sum in their pension pot – based on a starting salary of £28,000, with annual pay rises of 2%, taking into account 8% contributions via auto-enrollment and 3% per annum fund growth.

As 24% of people surveyed by the regulators admitted that they would make a decision on a new investment offer within 24 hours, the FCA has published the news story on its website under the headline ‘22 years of pension savings gone in 24 hours’. A pension scam often starts with an individual receiving an unsolicited phone call about a ‘free pension review’, and the individual may later be told that they have only 24 hours to decide whether to take advantage of the scammer’s investment offering.

63% of respondents described themselves as being confident in making decisions about their pension. However, this statistic appears to be contradicted by the fact that 63% of people also said they would trust someone offering pensions advice out of the blue, which is one of the main warning signs of a scam.

The regulators also report that consumers educated to degree level are 40% more likely to accept a free pension review from a company they have not previously dealt with. Consumers with degrees are also 21% more likely than other individuals to take up an offer that apparently allows them to access their pension savings earlier than is normally permitted.

The survey was conducted with some 4,000 UK adults aged between 45 and 65 who all had some form of pension savings.

As the scale of the problem grows, the UK’s financial advisers could have a vital role to play in educating their clients about the threat posed by pension scams

TPR and the FCA suggest consumers should follow a four-step process to guard against pension scams:

  • Don’t trust anyone who they have not dealt with before and who offers a pension review via an unsolicited phone call, email or any other method
  • Check the FCA Register to ensure the firm is authorised to give pension advice
  • Don’t be rushed or pressured into making any decision about pension savings
  • Consider seeking professional advice

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“We know many people have big plans for their retirement, whether it’s seeing new places, learning new skills or helping their families out financially. Pension scammers destroy those dreams, often forever.”

Nicola Parish, Executive Director of Frontline Regulation at TPR, said:

“Pension scammers ruin lives, stealing away decades’ of savings with professional-looking websites, ‘expert’ advice and an easy manner making it tough to spot the fraud. But once you sign on the dotted line, often there’s no second chance. Scams can happen to anyone, so before making any decision about your pension, take your time, be ScamSmart and always check who you are dealing with.”

Honey Langcaster-James, a psychologist, added:

“Scammers employ clever techniques, such as seeking to establish ‘social similarity’ by faking empathy and a friendly rapport with their victims. They can win your trust in a short space of time and by engaging with them you leave yourself vulnerable to losing a lot of money very quickly. People need to know how to spot the signs of a scam, so they don’t fall for psychological tricks.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article