Thousands of pension savers have fallen victim to companies that have now been closed down by regulators, but many could be unaware for months or even years thanks to the way scammers operate.
Scammers often pocket the pension savers' money and string the customer along saying their money is being invested.
For many it takes a long time for it to become clear that they have been subject to fraud as the scammers maintains contact but the actual investment ‘opportunity’ never materialises.
And many victims lose considerable sums. Victims of pension scams last year lost an average of £91,000 each to fraudsters, according to figures from the financial regulator the Financial Conduct Authority.
The 2015 pension freedoms have led to a spike in scams, as fraudsters have attempted to capitalise on pensions becoming more flexible and easier to access.
Tom Selby, senior analyst at AJ Bell, says: “It is horrifying that thousands of retirement savers have fallen victim to cruel retirement scams in recent years.
“Some victims will be unaware they have been duped for months or even years, while others will simply be too ashamed to come forward and report what has happened.”
Mr Selby says some of the biggest recent scams have taken a long time to unfold, and often involve unregulated overseas property investments that "simply fail to materialise" over time.
He adds: "Furthermore, it can take a long time for authorities – which are always limited by resource - to build a case against firms involved in scam activity."
Since 2015 the Insolvency Service has wound up 24 companies involved in pension fraud. It says an estimated 3,750 victims, both individuals and businesses, made £202 million of contributions to these firms.
What to do
Scammers will tend to contact out of the blue with what is usually a ‘too good to be true’ type offer. Callers can be silver-tongued so don’t let them rush you with information or decisions.
The scammer will typically try to discuss a business or investment opportunity or talk about taking your pension money before you reach pension freedoms age. They may also try to discuss ways you can invest your pension savings.
Typical scam offers include overseas ‘projects’ such as luxury hotels in exotic locations. Another common indicator that they are trying to scam you is by offering a “free pension review”.
In all instances you should immediately hang up the phone and report the call to the Information Commissioner’s Office (ICO).
Kelly Tolhurst MP, the consumer minister says: Our consumer protection regime is one of the strongest in the world and we are committed to making sure people know their rights.
"If you are approached to make an investment from your pension, always do your homework and seek independent advice, if necessary, to help you make an informed decision."
Unfortunately, if you fall victim to this type of scam, once you’ve transferred the cash, it’s too late.
According to government advice service Pension Wise, at this point your pension money will most likely be gone for good, and you could face huge fees from your provider and taxes of up to 55%.
If you think you might have been the victim of a pension scam, recent or historic, you should contact Action Fraud immediately on 0300 123 2040 or use the online reporting tool.
Cold call ban
In theory, pension scams will become less commonplace, thanks to the government’s implementation of a ban on cold-calling relating to pensions earlier this month.
This means in effect that any phone call that you receive from an unknown person or company, where they ask about your pension, is an illegal call.
Although the ban is a welcome one, it is worth pointing out that pension scam phone-calls will not stop entirely, as there are exemptions to the new law (for instance, calls from FCA-authorised firms are not banned).
The FCA exemptions make for an easy lie for a scammer to give over the phone to convince you they’re ‘legitimate’.
Furthermore, those calls that originate from abroad are outside the UK authority’s reach and will still inevitably continue.
It may be the case that the scammer has information about where your pension pot is held, or perhaps the company you work for, making it seems as if it is a legitimate call.
In these circumstances, politely hang up the phone and look up the number for your pension provider’s firm and call back instead. If your provider genuinely wants to speak to you, there will be a note on your file to say why.
The message is clear from the ban, if the person on the other end of the line wants to discuss your pension – just hang up.