Pension freedoms: scammers tricking victims into dodging safeguards

Scammers are teaching retirees what to say in order to dodge their pension provider's financial safeguards.

Older savers are being warned of a worrying new trick being used by scammers to steal their retirement nest egg.

Pension firm Aegon says crooks are effectively ‘grooming’ victims by convincing them their provider is planning to block them from accessing their funds.

They are then given a script of what to say to their pension provider to get around financial safeguards put in place to protect them, allowing them access to their funds without arousing any suspicion.

Kate Smith, head of pensions at Aegon, adds: “Customers are being reassured by the fraudster and are being told to disregard everything pension providers say and that our only motive is not to protect their savings, but to keep hold of their money.”

The warning comes as separate research suggests one in five people over 50 have been targeted by a potential scammer in the last three months alone.

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How the scam works

Aegon says suspicions were fist aroused when it found that customers were repeating certain technical terms not commonly heard before when ringing up and asking to transfer out their pension savings.

More tellingly, some even admitted they were warned to ignore attempts to talk them out of it.

“Scams continue to evolve to persuade people to take action they otherwise wouldn’t dream of” says Smith at Aegon.

“Pensions have become a honeypot for fraudsters who are always looking for innovative ways to part savers from their hard-earned pensions.

“One of the latest techniques is pension grooming, where fraudsters "groom" individuals on how to respond to pension providers when concerns about suspicious transfers are raised.

“Pension grooming is common in cases where the fraudster is trying to persuade customers to transfer their pension overseas when they have no intention of moving overseas, often on the promise of high returns or tax benefits.

“In most case when pension providers challenge customers and ask them if they are going to live overseas, they initially say yes, as groomed by the fraudster.

“It’s obvious they have not been made aware of the pension tax implications of an overseas transfer for UK residents, and when pension providers point this out, they often change their mind and decide not to transfer.”

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Make sure you’re informed

Needless to say, be wary of anyone trying to convince you to withdraw your funds and telling you what to say.

Given the huge sums of money at stake, you should also seriously consider paying for professional pension advice to make sure you’re properly informed and aware of any risks.

This isn’t just for the sake of avoiding scams: you could also be hit with a surprise tax bill.

Earlier this week, former pensions minister Ros Altmann warned that the Government’s Pension Wise service was failing provide enough support for people to avoid big pension tax bills.

“Just using the Pension Wise website is not sufficient for most people to deal with the changes and complexities of pensions,” Altmann told the FT.

“There is a real concern that people, when withdrawing money from their pensions, could inadvertently land themselves with a big tax bill when making further pension contributions.”

Speaking of pension tax, have a read of our simple guide to reclaiming if you've paid too much to the HMRC, as well as the simple trick to avoiding emergency pension tax.