More than 5m pension savers (42 per cent) are likely to fall for at least one of six tactics used by pension scammers, with the financially savvy just as likely to be fooled, according to the regulators.
Research from the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR), published today (August 7), showed that people who are actively seeking ways to boost their retirement income are even more likely to fall for scammers’ tricks, with 60 per cent likely to be tricked.
Last year, 180 people reported to Action Fraud that they had been the victim of a pension scam, losing on average of £82,000 each, the regulators said.
According to the 2,012 pension savers surveyed, who were aged 45-65, scammers using exotic investment opportunities and cold calls were more likely to persuade savers to give away details about their pensions.
Nearly a quarter (23 per cent) of savers would pursue an offer of high returns in either overseas properties, renewable energy bonds, forestry, storage units or biofuels despite all of these being classed as high risk investments.
Similarly, 23 per cent would engage with a cold call from a company asking to discuss their pension plans despite the government introducing a ban on pension cold calling in January.
Nearly a quarter said they would ask for website details, request further information or find out what the caller was offering, even if the call came out of the blue.
Helping savers to access their pension pot early is also a persuasive scam tactic, with one in six (17 per cent) savers interested in a company that could offer this.
However, individuals who access their pots before age 55 face a tax bill of at least 55 per cent and up to as much as 70 per cent if this is classed as an unauthorised payment.
Other tactics included offering guaranteed high returns, which 13 per cent of savers would pursue, and offering free pension reviews which 10 per cent of individuals said they would agree to.
The research also found that those who consider themselves smart or financially savvy are just as likely to be persuaded by these tactics as anyone else.
Guy Opperman, minister for pensions and financial inclusion, said: “Pensions are one of the largest and most important investments we’ll ever make, and robbing someone of their retirement is nothing short of despicable.
“We know we can beat these callous crooks, because getting the message out there does work.
"Last year’s pension scams awareness campaign prevented hundreds of people from losing as much as £3m, and I’m backing this year’s effort to be bigger and better as we build a generation of savvy savers.”
The FCA and TPR launched a scam awareness campaign in August 2018 which targeted pension holders aged 45 to 65, the group identified by the regulators most at risk of pension scams, and featured television adverts highlighting the most common tactics adopted by fraudsters.
The FCA revealed in December that the number of people seeking information about pension scams rose five-fold since the launch of the joint campaign. This year’s campaign is currently running on TV, radio and online.
Tom Selby, senior analyst at AJ Bell, said that the figures were worrying especially as regulators and government had worked to stop scammers targeting pensions.
Mr Selby said: “While huge strides have been made in tackling pension and investment fraud recently, particularly when it comes to raising awareness among consumers, this research shows a worryingly large number of people are at risk of falling victim to common tactics used by fraudsters.
“Government, regulators and the wider pensions industry must not rest on their laurels when it comes to combating the scourge of scams.
"The ban on cold-calling introduced in January this year was a welcome step in the right direction but it was never going to eliminate retirement fraud altogether."
He added: “Scammers’ tactics are evolving all the time and increasingly we see complex schemes promoted online through social media.
"This virtual Wild West is a natural home for fraudsters, with governments around the world struggling to create meaningful protections for consumers.
“Education about the dangers of scams and actions people can take to protect themselves is therefore absolutely critical.”
The FCA and TPR have warned savers to reject any unexpected pension offers whether they are made online, on social media or over the phone.
The regulators also stressed that individuals should check the FCA register to see whether a firm is registered before changing any pension arrangements and to get advice before making any decisions.
Honey Langcaster-James, a psychologist, said everyone was at risk of being scammed, even though they might think they are able to spot a fraudster.
She said: “We tend to assume that it would never happen to us because we think we’d notice something if it wasn’t right. But even the smartest and savviest among us can become victims of crimes and we do often have a ‘blind spot’.
“Sophisticated scammers take advantage of this and use powerful psychological techniques to build trust and rapport and ultimately to influence our behaviour.”
amy.austin@ft.com
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