Pension Scams: How to Protect Yourself and Spot the Warning Signs

Pension fraud is sophisticated, persistent, and growing. The FCA and The Pensions Regulator (TPR) estimate that pension scams cost UK savers hundreds of millions of pounds, though the true figure is likely higher because many victims never report the loss — out of embarrassment or because they do not initially realise they have been defrauded.

The profile of the typical pension fraud victim challenges many assumptions. It is not the elderly person with no financial education who falls for a scam — it is, statistically, a financially confident professional in their 50s with a significant pension pot. The scams are designed to bypass the normal scepticism of intelligent people by exploiting precisely the knowledge and confidence that makes those people feel they can evaluate a sophisticated investment proposition.

Understanding how pension fraud works, what the warning signs are, and what protections exist is essential knowledge for every pension holder.

Important: If you suspect you have been the target of a pension scam, contact Action Fraud (0300 123 2040), the FCA (0800 111 6768), and The Pensions Regulator immediately. Do not delay — the chances of recovering funds decrease rapidly with time. This guide is for general educational purposes and does not substitute for professional legal or regulatory advice.

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The Scale of the Problem

FCA data and Action Fraud reports consistently show pension fraud as one of the highest-value fraud categories in the UK. Individual losses from pension scams frequently reach £50,000-200,000 — because the target is the pension pot, which is typically one of the largest single financial assets an individual holds.

The profile of victims is well-documented. FCA consumer research has shown repeatedly that:

• Men in their 50s are the most likely demographic to be targeted and to fall victim
• Victims are, on average, better educated and more financially aware than the general population
• The majority of victims say, in hindsight, they did not think it could happen to them
• A significant proportion of victims suffer secondary financial losses — taking out loans, raiding ISAs, or drawing on other savings to fund additional contributions to the fraudulent scheme before the fraud is discovered

The psychological mechanisms behind this vulnerability are well-studied: authority bias (the fraudster presents as a professional with credentials), social proof (other investors are already in the scheme, doing well), and the "too much effort" heuristic (the documentation is so elaborate and professional that the victim assumes due diligence has been done somewhere).

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The Main Types of Pension Scam

1. Pension Liberation Fraud

Liberation fraud is the attempt to persuade pension holders to access their pension funds before the minimum pension age (currently 55, rising to 57 in 2028). Because early access is prohibited by pension rules (any payment before the MPA is an "unauthorised payment"), liberation fraud typically involves transferring the pension to a fraudulent scheme and then extracting the money.

The victim faces two devastating consequences:

• The pension is gone — transferred to a scheme controlled by fraudsters and invested in worthless or non-existent assets
• HMRC treats the "payment" as an unauthorised payment and charges a tax of 40-55% on the "payment" received (even though the victim received nothing, because the payment was made to the fraudster, not them). In some cases, victims have faced six-figure HMRC tax bills on money they never received.

Liberation fraud is most commonly sold as: "a legal loophole"; "a specialist pension review service"; or an "emergency cash advance from your pension." None of these exist. There is no legitimate way to access your pension before the minimum pension age.

2. Bogus Investment Schemes via Pension Transfers

In this category, the pension is transferred to a legitimate registered SIPP — but the SIPP is then invested in fraudulent, non-existent, or grossly overvalued "investments." The fraudsters typically set up the SIPP as the vehicle and select investments designed to enrich themselves rather than the investor.

Common investment categories used in these scams include:

• Storage pods and car park spaces: Sold as high-yield commercial property investments. Often the physical asset does not exist, or exists but has no realistic rental income.
• Carbon credits and forestry: "Green" investments with complex documentation that obscures the absence of underlying value.
• Overseas hotel rooms and resort developments: Off-plan development investments that are never completed, or are completed but cannot generate the claimed rental yields.
• Unregulated bonds and mini-bonds: Fixed-interest debt issued by companies with no track record or assets, often channelled through ISAs and SIPPs as apparently legitimate investments.

The FCA has taken enforcement action against numerous SIPP operators that facilitated these investments. A series of FCA thematic reviews and court decisions (such as the Berkeley Burke and Adams v Carey cases) established stronger due diligence expectations for SIPP operators accepting unusual or non-standard investment instructions.

3. The "Free Pension Review" Scam

An unsolicited approach — by cold call, text, email, or via a social media advertisement — offering a "free pension review" or "pension health check." The purpose is to:

• Identify the size of the pension pot (the value of the target)
• Persuade the victim that their current pension is underperforming and should be transferred
• Execute the transfer to a scheme controlled by or linked to the fraudster
• Collect an upfront fee, a transfer commission, or simply the pension funds

In some cases, the "review" leads to advice to invest in high-risk, illiquid products that are unsuitable but from which the adviser earns large commissions. In the worst cases, the "adviser" is not registered with the FCA at all.

Since January 2019, cold calling about pensions has been illegal. Any unsolicited contact offering a pension review is either a fraudulent approach or (at minimum) a serious regulatory breach. Hang up immediately; do not engage.

4. The "Introducers" Network

Some pension fraud operations use a two-layer structure: an "introducer" (typically an unregulated individual acting on commission) who identifies potential victims and passes their details to a "regulated" firm that completes the pension transfer. The regulated firm may itself be compliant in processing the transfer, but the investment recommendations come from the introducer network, not from the regulated firm.

The regulated firm earns its fee; the introducer earns a commission; the victim's pension is invested in schemes that benefit the promoters, not the investor. The regulated firm claims it was simply processing a transfer instruction and has no responsibility for the investment decision.

This layered structure — where responsibility for the harm is diffused across multiple parties — makes redress difficult. Regulatory action following the British Steel pension mis-selling scandal (where introducers targeted steelworkers ahead of the scheme's restructuring) tightened the rules on how regulated advisers can accept pension transfer business from third-party introducers.

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The Red Flags: Warning Signs Every Pension Holder Should Know

The FCA and TPR ScamSmart campaign has identified a consistent set of warning signs. If any of these are present, stop the transaction immediately:

Contact red flags:

• Unsolicited contact (cold call, text, email, social media message) offering a pension review, pension advice, or pension enhancement
• Contact via WhatsApp, Telegram, or other encrypted messaging services — legitimate financial advisers do not operate this way
• High-pressure tactics: "This offer is only available until Friday"; "Other investors are already in — you need to decide today"
• Requests for secrecy: "Don't tell your spouse / solicitor / existing adviser about this"

Investment red flags:

• Guaranteed returns of 8%, 10%, or more per year with no risk
• "Capital guaranteed" or "no-risk" claims for investments that would otherwise need to offer a risk premium to attract capital
• Unusual or niche investment types (overseas property, storage pods, renewable energy, forestry, exotic fixed income)
• The investment is illiquid: "Your money will be locked in for 3-5 years while it generates returns"

Transfer red flags:

• Being asked to transfer your pension to a scheme you have never heard of, with no employer connection
• An upfront payment from "your pension" to prove the scheme works before the full transfer
• Documents that look professionally produced but contain errors, non-existent company addresses, or directors who cannot be verified on Companies House
• The receiving scheme's trustees cannot be verified on the TPR register of authorised occupational schemes

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The Regulatory Protection Framework

Since 2021, UK pension law has included enhanced protections against pension transfer fraud:

Transfer gateway checks (November 2021 regulations): Before a pension transfer can proceed, the transferring scheme must verify that the receiving scheme is either an authorised master trust, a scheme with a genuine employment link, or a genuinely self-employed person's own SIPP. Transfers to schemes that cannot demonstrate these characteristics must be refused.

Amber flag and red flag system: The 2021 regulations require trustees to assess pension transfers for red and amber flags:

• Amber flags (which should trigger the trustee offering the member a guidance appointment with Money and Pensions Service before proceeding): incentives to transfer; high-risk investments in the receiving scheme; overseas investments
• Red flags (which should cause the transfer to be refused): inability to evidence the receiving scheme; clear scam indicators (e.g., caller claiming to be from HMRC about the transfer)

The 28-day pause: Where amber flags are identified, the transfer is paused for 28 days while the member takes a guidance appointment. Some members override the guidance advice and proceed with the transfer; many do not — the pause has saved significant sums.

FCA Register verification: Any investment advice or financial promotion about a pension investment must come from an FCA-authorised firm. Check the FCA Register at register.fca.org.uk before acting on any advice. Be aware that fraudsters sometimes impersonate genuine FCA-registered firms ("clone firms") — verify by calling the firm directly using contact details from the FCA Register, not from any documentation provided by the person you are dealing with.

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What to Do If You Have Been Scammed

If you believe you have been the victim of a pension scam, act immediately:

1. Contact Action Fraud (0300 123 2040 or actionfraud.police.uk). This is the national reporting centre for fraud and cyber crime.

2. Report to the FCA (0800 111 6768 or fca.org.uk/consumers/report-scam). The FCA can take action to freeze accounts and alert other potential victims.

3. Report to The Pensions Regulator (thepensionsregulator.gov.uk/en/contact-the-pensions-regulator). TPR can take enforcement action against schemes.

4. Preserve all documentation. Keep every email, letter, brochure, contract, and record of telephone calls. Write down what was said in conversations.

5. Seek legal advice. A solicitor experienced in financial fraud can advise on the possibility of recovery. Some fraudulent schemes may have assets that can be frozen by court order.

6. Contact your original pension provider. If the transfer has not yet completed, it may be possible to halt it.

Recovery of funds after a pension scam is unfortunately uncommon, but not impossible. Speed of action is critical.

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How Global Investments Can Help

At Global Investments, we operate exclusively through FCA-authorised partners for regulated pension advice. We do not make unsolicited contact with potential clients about pension investments, we do not offer "free pension reviews" via cold contact, and we do not recommend investments in illiquid, unregulated, or exotic assets.

If you are uncertain about the legitimacy of pension advice or a pension transfer you have been offered, our team can help you verify the credentials of those involved and assess whether the approach has the hallmarks of a scam. Contact us for a confidential discussion.