FCA warns cost of living crisis increases the risk of pension scams

FCA warns cost of living crisis increases the risk of pension scams

The FCA has warned that pension holders are increasingly vulnerable to ‘misdirection’ scams as the cost of living crisis increases the number of pension pots being accessed for the first time.

In research undertaken by the regulator as part of its latest ScamSmart campaign, the FCA found that a quarter of consumers would consider withdrawing money from their pension earlier than planned to cover the cost of living.

The data also showed that the number of pension plans accessed for the first time between 2021 and 2022 rose 18 per cent to 705,666 compared with 596,080 the previous year.

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As part of its campaign, the City watchdog is warning consumers of ‘misdirection’ tactics scammers are using to con people out of their pensions.

These can start with the offer of a free pension review, which 44 per cent of 1,000 people surveyed said they would take up.

“Concerns about having enough money to last throughout their retirement make them vulnerable to the lure of boosting pension returns,” the FCA said.

Scammers are also improving the way they reassure potential victims, becoming increasingly skilled at producing fake websites and brochures.

Some 46 per cent of those surveyed said third-party verification from a separate individual would reassure them, with 31 per cent agreeing that positive reviews of their service would do the same.

The scammers then prey on their victims’ misunderstanding of how pension savings work, as 54 per cent of people do not feel confident growing their pension pot, and 38 per cent do not understand how pensions work.

Opinium surveyed 1,009 UK adults aged 40 and over with a workplace or private pension on behalf of the FCA.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Many of us have sat in awe as magicians make things disappear right in front of our eyes, despite us thinking we are in control, or can see everything going on. But the trick ends there, and we can enjoy the rest of our night.”

That doesn’t happen with pension scams, he said, and rising cost of living is affecting people at all savings levels, which pension scammers are taking advantage of. 

“Misdirection in this context means victims are lured in with the promise of a better lifestyle in retirement, or to support their living costs with pension savings.”

“It’s important that consumers stay alert to these tricks to protect themselves before the sleight of hand can begin.”

The FCA has called on consumers to check the information on its ScamSmart website before making any decisions about their pensions, including the warning list which identifies firms actively running scams.