Pension scams are on the rise so if you're thinking of investing your pension benefits, or transferring them to another pension provider, make sure you protect yourself from scammers.
The risks of transferring your benefits to an illegal company may be very damaging to your future financial security. If you do fall victim of a scam, it is unlikely your money will be recoverable. You may also face a tax bill from HM Revenue and Customs (HMRC).
The Pensions Regulator has released a four step guide to help you protect yourself from pension scams.
You can also get further information and advice from MoneyHelper and the Financial Conduct Authority (FCA).
If you're thinking about transferring your benefits out of the LGPS and seeking financial advice, we recommend you visit the Financial Conduct Authority's website. They've created a video explaining defined benefit pension scheme transfers, and the service you should expect from your financial adviser.
If you're worried that you may have fallen victim to a scam, contact Action Fraud.
How we protect you from scams
- regularly warn members about pensions scams
- encourage members asking for cash drawdown to get impartial advice from MoneyHelper
- get to know the warning signs of a scam and best practise for transfers
- take appropriate due diligence measures by carrying out checks on pension transfers and documenting pension transfer procedures
- clearly warn members who insist on high-risk transfers being paid
- report concerns about a scam to the authorities and communicate this to the scheme member
How you can protect yourself from scams
If you're paying money into a registered pension scheme your contributions receive tax relief. This means you don’t pay tax on the money you put into your pension account.
The pension tax rules state you can’t take your benefits before age 55, unless you're suffering from ill-health. If you take your benefits before age 55, this is considered an unauthorised payment by HMRC, and you would have to pay back the tax relief. This is known as pension liberation.
Pension liberation should not be confused with ‘freedom and choice’. This allows members of defined contribution pension schemes, who are 55 or over, to access their benefits more flexibly. This includes the option to take all your benefits as a cash lump sum.