From promises of 'guaranteed results' to a lack of risk assessment, these are the tell-tale signs you're dealing with a scammer.
Pension pots provide rich picking for criminals and the number of people being parted from their retirement savings is on the rise.
Pension Life, a campaign group set up to represent the victims of pension liberation scams, says its members have lost more than £2 billion.
In an effort to help people protect themselves from scammers, Pension Life has released details of the five tricks it sees the most.
1. Guaranteed results
“The first thing to look out for is the claim of ‘guaranteed results’,” says Angela Brooks, Pension Life’s chairman.
“The scammers typically use the magic numbers 8%-9% growth per year for two to five years.
“In the real world, there is no such thing as a guaranteed return. It is a hook to catch people who are, quite understandably, keen to grow or improve their pension.”
2. Property investment
The second thing you should look out for is references to speculative property, particularly offshore.
“Scammers will promise spectacular growth opportunities with all sorts of unusual – or ‘esoteric’ – property developments,” says Brooks.
“However, the problem with property is that it is illiquid and not necessarily easy to sell.
“A pension needs to be liquid so that if a member wants to transfer out, reaches the age of 55 or even retirement age or dies, the fund has to be ready to transfer out quickly.
“If it is all tied up in long-term, speculative property, it can take years to get out of the investment, an early redemption might attract punitive penalties.”
3. Unregulated funds
Watch out for investments in unregulated funds or assistance from unregulated advisers.
“If there is no regulation, there is no protection,” says Brooks. “Don’t be fooled into being assured that a firm is regulated when it isn’t.”
If an unregulated firm goes bust, the investors will lose everything.
4. ‘No advice was given’
Check the small print to make sure you aren’t using a scheme offered by a firm that looks like an advisory firm, but which claims ‘no advice was given’.
“When the whole scheme goes pear-shaped, the firm responsible – which could even be an FCA-regulated firm – will try to claim they did not provide advice – they just offered the scheme and left it to the participants to make up their own minds as to whether it was suitable for them.”
5. Lack of risk assessment
Finally, a genuine scheme will always assess your risk profile before any money changes hands.
“It is crucial to determine an investor’s risk profile. Before any major financial transaction, there should always be a fact fine, which is a Q&A to determine what this is,” says Brooks.
“Any investment recommendations should respect the individuals risk appetite.
“Most ordinary people are ‘low-risk’ – but the scammers often try to trick victims into agreeing they are ‘sophisticated’ or even ‘high risk’.”
More scams to watch out for: