Many UK adults could struggle to spot some of the most common warning signs of a pension scam, according to new research from Standard Life, a retirement specialist focused entirely on retirement savings and income.
Despite 62% of people saying they feel confident that they could spot a pension scam, Standard Life’s pension scam test found that three in five (60%) people did not know that pension providers or advisers are not legally allowed to cold call people about pension opportunities or reviews – a misunderstanding that could make it harder to recognise one of the most common warning signs of a pension scam.
According to Report Fraud, UK pension scam victims lost an average of around £47,000 last year, highlighting the importance of protecting retirement savings that people have often spent decades building. More broadly, the findings suggest some savers may be vulnerable to approaches that exploit misunderstandings about how pensions work, what legitimate firms can and cannot do, and which checks are worth making before taking action.
How did people score on a pension scam test?
The research explored several common myths and misunderstandings that scammers can use to make fraudulent approaches appear more convincing.
Nearly three in four (73%) either believed that if a company appears on the FCA register, any investment it offers is guaranteed to be safe, or were unsure.Three in five (60%) either got the answer wrong or said they did not know whether pension providers or advisers are legally allowed to cold call people about pension opportunities or reviews.Four in ten (40%) either believed you can withdraw money from your pension at any age or said they did not know.
The findings suggest there is an opportunity to improve understanding of some key pension rules and scam warning signs, helping more people feel confident identifying risks and making informed decisions about their financial future.
False signs of trust
The findings also suggest some people may be placing trust in factors that do not necessarily indicate whether a pension opportunity is genuine. One in five (20%) believe a professional-looking website and positive online reviews are reliable indicators that a pension opportunity is genuine, while one in seven (14%) believe adverts on professional or social networking sites mean a company is trustworthy and can act in their best interests.
Encouragingly, more than half (53%) correctly identified that a pension scam may involve real companies, real advisers and genuine paperwork, suggesting many people recognise that modern scams are not always easy to spot. This is an important distinction, as some of the most serious risks can arise where an approach looks legitimate on the surface but involves unsuitable investments, poor advice or recommendations that are not in a saver’s best interests.
Not everyone is carrying out independent checks
Despite this, some people are still not taking independent steps to verify opportunities before engaging with them. While some said they discussed the opportunity with family or friends (7%) or researched the company online (7%), 8% admitted they carried out no checks at all.
Donna Walsh, Head of Master Trust and IGC Governance at Standard Life, said: "Pension scams are increasingly sophisticated making them appear genuine. They can come with convincing websites, positive reviews, familiar names and paperwork which is exactly why they can be so dangerous. What stands out from our test is that many people could benefit from greater awareness of some key pension rules and warning signs. That's important because understanding how pensions work can help people make more confident decisions and better protect the savings they've worked hard to build.
The industry from providers, workplace employers, and advisers to our regulators, is taking action and pulling together to build awareness to help pension scheme members spot fraudulent approaches. Likewise, a reinvigorated PSIG, the pensions scams industry group, is stepping up its activity and education programme to combat such approaches.
“With changes to the inheritance tax treatment of pensions approaching and people likely to be reassessing their retirement plans increased vigilance is required, with fraudsters often quick to exploit periods of change and uncertainty.
“The best protection people can take is to pause, check independently and avoid being rushed. A legitimate pension opportunity should never depend on pressure, urgency or confusion. If in doubt, contact your pension provider. The more people understand the warning signs and know which checks to make, the better placed they are to protect their savings, achieve greater financial security in later life and make informed decisions about their financial future."
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