How employers can help employees avoid pension scams

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With the cost of living having increased, employees may be feeling more worried about their financial situation – potentially leaving them more vulnerable to pension scams. Employers, though, can play a part in helping employees keep their pension savings safe from scammers. Here’s how.

What is a pension scam?

A person being targeted by a pension scam may be encouraged to transfer their pension pot into a non-existent or high-risk scheme. They may also be persuaded to release some or all of their pension pot.

The average pension scam is believed to involve over £75,000 of savings. For some people, losses may be less than £1,000. For others, losses can run into hundreds of thousands.

Warning signs of a pension scam

A pension scam often starts with an out-of-the-blue email, letter, direct message on social media or phone call (pensions cold-calling was banned in 2019, but scammers may still do it). The scammer may describe themselves as a pension adviser or pretend to represent a government agency, legitimate financial services firm or well-known personal finance expert. 

Scammers also post ads online, although measures to tackle paid-for scam ads will be included in the UK government’s Online Safety Bill.

Regardless of how a person is approached, warning signs highlighted by The Pensions Regulator include:

• Phrases like ‘free pension review’, ‘pension liberation’, ‘loan’, ‘savings advance’ or ‘cashback’.
• Offers of guaranteed or high returns from unusual, unregulated or overseas investments, offering no consumer protection – The Pensions Regulator gives overseas property and hotels, renewable energy bonds, forestry, parking and storage units as examples of such investments. But examples could also include art or even cryptocurrency. These investments usually require the person to transfer their pension savings into new scheme, and a scammer claiming to be an adviser may take multiple fees along the way. Investments that are only available after a transfer could be a sign of a possible scam.
• Help to release upfront money from a pension plan before the age of 55 – Most people can only access their pension plan from the age of 55 (rising to 57 from 6 April 2028). But scammers may tell people they can get early access through a loan or loophole. The victim could then be hit with a double blow: not only losing their pension savings but facing a high tax bill if they access their pension plan early.
• Pressurised sales tactics that refer to opportunities being ‘time limited’ or ‘one-off’.
• Complicated investment structures – A common situation is where someone is ‘advised’ by a scammer to invest in a bond held by a pension scheme. Due to the investment structure, the scam victim may pay charges for the pension scheme and the bond. The bond may be provided by a company connected to the scammer. 

Research from the Financial Conduct Authority (FCA) last year found that a quarter of people would withdraw pension savings earlier to cover their living costs. This means that, with inflation still high, more people may be likely to say yes to a scammer offering to give them early access to their pension money.

What can employers do to help employees avoid pension scams?

Encourage reporting

Employers can encourage employees to report scams they come up against and support them in doing so. If employees believe they have come across a scam online or have been targeted by scammers, they should report it to the FCA and Action Fraud. 

Reporting scams may increase the chances of the scammer being caught and stopped. Highlighting to employees the importance of reporting could help prevent others from becoming victims in future.

Raise scam awareness

Employers could offer resources to employees to help them understand what pension scams may look like. This could stop them from rushing into any decisions and losing their pension savings. 

There are various online resources employers may wish to share with their employees. For instance, Take Five is a national campaign that could help enhance employees’ scam awareness. It provides informative content in different formats – such as a quiz, a ‘Scam Bingo’ game and a short video. 

If your employees are members of a Standard Life pension scheme, you can also make use of our ‘Scam smart’ ready-to-go campaign. This is a free, ready-made campaign that directs members to tips on how to avoid investment and pension scams.

Financial education

Employers can also help by providing their employees with easy-to-follow financial education content. For example, Standard Life’s Money Mindset could help improve the financial knowledge of Standard Life pension scheme members. With this finance tool, members have access to a library of bitesize content that they can dip in and out of whenever they have even a few minutes of free time. 

If employees are equipped with digestible information on topics like retirement planning and how their pension plans actually work, they could feel more confident in making decisions and may be better placed to identify scam tactics.

It may also be useful for employers to help their employees understand the distinction between financial advice and guidance. The Money and Pensions Service has a table explaining key differences between the two. 

Employers may wish to point employees in the direction of the Financial Services Register. Through this, employees seeking financial advice can check if firms and individuals have been authorised by the FCA. Although employees should also check if there are any non-UK addresses involved if they’re dealing with an individual or company. Sometimes, a person providing advice could be registered with a firm in the UK but is actually giving advice in the name of an overseas company that’s not FCA-registered.

Overall, by facilitating this kind of financial education, employers can help play an active role in keeping their employees’ pension money safe from scammers.

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