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Top Tips for Avoiding Getting Scammed Out of your Pension

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It is estimated that more than 1.3 million people have been targeted by unscrupulous regulated and unregulated financial advisors who have pedalled bad advice. These unscrupulous advisors have persuaded many people to transfer their existing private pensions or extremely valuable defined benefit pensions, to open a SIPP (Self Invested Personal Plan) and to “invest” in unregulated, high risk and illiquid “investments”. Many people have lost most, if not all, of their pensions which they have been paying into all of their working lives. In some cases, people have transferred pension pots of £500,000 or more into worthless “investments” sold to them by dodgy or incompetent financial advisors who were not authorised or regulated by the Financial Conduct Authority (FCA).

Investments that promise significant returns but deliver losses have led to people losing most or all of their pension funds, leaving them devastated, often traumatised, unable to retire comfortably and often unable to retire at all.

Solicitor Paul Higgins of Pension Justice, a law firm that specialises in assisting victims of pension mis-selling to help recover some of their lost money, says:

“That old adage of ‘if it sounds too good to be true, it probably is too good to be true’ couldn’t apply more than in the case of pension mis-selling. We’ve had clients that have been promised huge returns on unregulated investments into things such as storage pods, airport car parking spaces, fractional ownership of property in Cape Verde, carbon credits and more, which sadly have all turned out to be worthless”.

Pension Justice has helped its clients, who have been given bad advice, to recover millions of pounds in compensation and has the following top tips to help people from falling victim to pension mis-selling. Knowing what red flags to look out for could save a person from making a terrible mistake that could help them avoid losing their pension and ruining their retirement.

1.    Be suspicious of cold calls from financial advisors. As a general rule don’t take cold calls. If you don’t know who they are, put the phone down. If you are interested in talking to them, do some background research into their qualifications and the investments they are offering. Promises of doubling your money are probably worthless. Unfortunately, there are many unscrupulous “advisors” out there who prey on people by offering “free pension reviews”. Under no circumstances agree to anything on the phone or invite them into your home, however convincing, how friendly they are or how much pressure they put you under.

Check with the Financial Conduct Authority to see if they are authorised to provide financial advice.

2.    Do your homework on the investments offered. Look up pension mis-selling, discuss the investment opportunity with friends and family and ask someone to help you do some research online if you are not internet savvy.  Unregulated investments are highly risky, and you could lose your life savings for the baseless promise of high returns.

3.    Make sure you understand the terms and conditions.  Your financial adviser is in a position of trust and has to communicate the terms and conditions of any products they are selling. They need to ensure you are fully informed before making any decisions. If your pensions advisers don’t explain any terms and conditions, you will likely be able to file a claim.

4.    Ask for a full breakdown of fees and charges. Make sure you find out exactly how much this transfer will cost you in terms of fees and annual charges. Again, victims of mis-selling sometimes end up paying out more money to the advisor than their pension earns. If the advisor is not clear about these fees and charges, then walk away.

5.    You have been advised to transfer your pension from a workplace pension. It is doubtful that it will be beneficial for you to transfer your extremely valuable defined benefit pension and there is a good chance that you will be mis-sold.

“If you think you have already been a victim of pension mis-selling, it is possible to get compensation.  Pension Justice have recently helped one client recover compensation. She transferred £35,000 from a defined benefit NHS Superannuation Scheme of Scotland pension into a SIPP and thereafter “invested in an Ethical Forestry scheme” which failed. We recently helped another client who had a defined benefit scheme pension with Proctor and Gamble and also a personal pension which together were worth over £158,000. She was persuaded to open a SIPP and to transfer her pensions into that SIPP and thereafter invest over £149,000 in “investments” which subsequently failed. Pension Justice pursued a claim on her behalf to the FSCS (Financial Services Compensation Scheme) and in February 2020 recovered £85,000.00 in compensation for our client, the maximum payable under the scheme”, says Paul.