Victims of pension scams lost over £50,000 on average this year, marking a two-fold increase on the year previous, new figures show.
Official statistics from Action Fraud show that a total of £2,241,774 has been lost to pension scams since the beginning of the year.
However, the true number may be higher. Many victims of pension scams are reluctant to report their experiences or are unaware they have been scammed until years later.
Increasingly, scammers are widening their targets to prey on pension pots large and small. Reported losses range from under £1,000 to as much as £500,000, Action Fraud revealed.
To combat the issue, the Financial Conduct Authority has launched a new awareness campaign urging pension savers to “flip the context” when presented with lucrative offers online.
Using simple psychology, the ScamSmart campaign asks savers to imagine the same offer being presented to them in a public setting, such as a pub or at a shop.
Research conducted by the FCA shows that pension holders were up to nine times more likely to accept advice from someone online compared to a stranger they met in person.
Similarly, they were five times as likely to be interested in free pension reviews from a stranger online as opposed to someone in their local pub.
A psychologist supporting the new campaign, Dr Linda Papadopoulos, said scammers take advantage of the way people make decisions when in certain environments.
“Scammers will use behavioural tactics to trick you into a false sense of security. Often these criminals will manipulate and persuade you to do things in the moment, which ordinarily you would feel suspicious of in a more familiar setting, such as a shop or local pub,” she said.
“It is important when approached with a financial offer on your pension, to take yourself out of the context or pressure of that moment.”
According to FCA research, half of pension holders said they would be unlikely to make an ‘impulse buy’ based on offers promoted by retailers.
However, more than one-third (36%) were also unable to recognise time-limited offers as a telltale sign of a scam.
“Scammers will often try to tempt pension holders with time-limited offers that are too good to be true to pressure them into making a rash decision about their pension,” the FCA warned.
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Research from the regulator also highlighted a misplaced sense of confidence over pension holders’ ability to spot scams.
More than two-thirds (68%) insisted they could identify a scam, yet when quizzed only 28% realised that a free pension review was often a sign of a scam.
Less than half (40%) also knew that requests to transfer pensions were a clear sign of a scammer at work.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA urged pension holders to remain vigilant online.
“Whether you’re on social media or checking your emails, if someone offers you free pension advice, ‘flip the context’ and imagine them doing the same thing in real life. Stop and think how you would react,” he said.
“Fraudsters will seek out every opportunity to exploit innocent people, no matter how much they have saved.”
If in doubt, Steward said consumers should check the status of a firm before making any financial decisions and visit the FCA website, which provides detailed information on how to spot scams.
According to the FCA, five common warning signs of a pension scam include:
- Being offered a free pension review out of the blue
- Being offered guaranteed higher returns – claiming they can get you better returns on your pension savings
- Offered to help to release cash from your pension, even though you’re under 55
- High-pressure sales tactics – scammers may try to pressure you with ‘time-limited offers,’ or even send a courier to your door to wait while you sign documents
- Unusual investments which tend to be unregulated and high risk