Islanders warned to beware of pension scams

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Western Isles Citizens Advice Service (WICAS) is warning consumers in the Western Isles about elaborate pension scams that fraudsters are now employing to part people from their pension funds.

The complexity of pensions means that they’re open to abuse, and developments in technology have made scams more elaborate in recent years. Areas such as Self-Invested Personal pensions (Sipps), unregulated collective investment schemes (Ucis) and pension unlocking are particularly popular with fraudsters. The Serious Fraud Office (SFO), alongside the Financial Services Authority (FSA), the Pensions Regulator and other trade bodies, are working to stamp out pension scams.

Self-invested personal pensions (Sipps) allow savers to choose where they invest their pension fund, so fraud is usually based around risky investments. The SFO says overseas property, golf courses and sustainable energy are among the common investments fraudsters use. Fraudsters will praise the good returns on these schemes and encourage savers to invest - but often they will never see a penny of their money again.

Ucis are also pushed towards savers with the promise of significantly boosting pension income. Ucis often invest in things like rainforest development and foreign hotels, set far away from the UK so it’s more difficult to find out if they are legitimate.

Worse still is that Ucis aren’t regulated by the FSA and aren’t covered by the Financial Services Compensation Scheme – so if the investment turns out to be fraudulent, you will not be able to claim your money back.

The FSA has now banned the sale of Ucis to retail or small investors, unless they have signed a form to say that they are a sophisticated investor. 

Additionally, unlocking your pension early may sound attractive at first; however it is also an area where fraudsters use in order to access your money. Pension unlocking companies not only charge a large fee for giving you this access, but they also fail to explain how tax impacts upon pension unlocking. Although pension unlocking for the over 55s is allowed by HMRC, these scams often use bullying tactics such as cold calling and texts. Some of them even threaten that you’ll owe the pension company money in retirement if you don’t unlock your fund immediately.

WICAS spokesman Ewan Kennedy commented;

“As technology improves fraudsters are employing ever more devious tactics to part consumers with their hard earned pension funds.”

“The first piece of advice I would offer to anyone who is approached by a company offering to do any of the above, always seek regulated financial advice. It may seem a good idea to boost your pension fund or gain access to it, but that is exactly what the fraudsters want you to think. Always seek financial advice and don’t leave your pension exposed to fraudsters.”

“Secondly, many pension fraudsters have worked in financial services for some time and know what to say to sound legitimate. Don’t let your judgement be influenced by jargon, always ask for details on what they are offering and who they are regulated by. Also be wary of offers of a guarantee on Sipps or Ucis, fraudsters often use guarantees to lure you to sign the dotted line, these guarantees often do not stand up to regulations”.

“Furthermore, if you are cold called about pension investments etc, trust your gut instinct. If someone sounds like they are trying to get you to reveal details about your pension or anything else you feel uncomfortable with, hang up the phone and report it to your local trading standards department.”