Comprehensive Guide to Pension Fraud and Compensation Claims


Ignatius Uirab

Money Savings Advice Comprehensive Guide to Pension Fraud and Compensation Claims

Most of us start preparing for our future from a fairly young age. We set money aside for retirement throughout our adult working lives, either through a workplace pension or a SIPP - a self-invested personal pension. We hope that when we reach retirement age, the money we've saved and put into a SIPP will be there for us to use and enjoy.

Pension scams can happen, destroying dreams and depleting the savings that you've worked so hard for. Learning to recognise and identify pension fraud, and know what to do if it happens, is your best chance of enjoying your retirement with more money and less stress. Here we'll explain everything you need to know about mis-sold pensions and the action you can take if you need to make a complaint.

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The Different Types of Pensions Available

There are many different types of pensions to choose from. Some people have more than one, including a mix of a company pension scheme and SIPP investments. It's very important to understand your pension and know what contributions you're making. Having the wrong type of SIPP can cause problems when you reach retirement age.

You might have a pension through your employer but also have a separate private SIPP to maintain on your own, and it's important you keep track of your details. Any pensions you maintain will be entirely separate from the state pension most are entitled to, so your own pensions are extra money on top of any funds the state provides.

Personal or Private Pension?

A personal pension – or private pension - is one that you'll set up on your own. Every month, you make a contribution to the provider of your choice. Your chosen provider will keep maintaining your pension for a fee. They are often referred to as a SIPP - a self-invested personal pension.

Many people choose a SIPP if they don't have one elsewhere. If you're not in an employer's pension scheme, you'll likely want a personal pension. You can also set up a SIPP separate from other pension pots, so you've always got a separate way to save for your retirement years.

Brief Explanation of a State Pension

Most people are eligible for a state pension. This is given as a regular payment once you reach the state pension age.

The state pension is minimal. For most people, it is not enough to live on comfortably. To be eligible, you must have made at least ten years of qualifying National Insurance contributions during your working life.

Currently, you'd receive around £175 per week. This works out at about £700 to £800 per month.

Brief Explanation of a SIPPs Pension

A SIPP is a type of personal pension. This Self Invested Personal Pension gives you more control over your funds. Unlike other types of personal pensions that may be managed on your behalf, a SIPP allows you to make your own investment decisions. 

SIPPs are really only for very experienced investors. Having control over your own money will mean that you're responsible for your pension pot's success. You could risk losing a lot of money if you don't know what you're doing.

Brief Explanation of a Final Salary Pension

Now very rare, Final Salary Pensions are also known as Defined Benefit. Instead of making contributions and hoping for the best, you're told early on exactly how much you'll receive if you contribute as agreed. You don't build up a pension pot but make regular payments towards the promise of a guaranteed annual income for the rest of your life.

Why You Should Save in a Pension?

Saving money in a pension is a good financial decision. There are many good reasons to save for retirement if you want to live comfortably.

What Happens if You Have Small State Pensions?

For many people, the State Pension isn't enough. You'll receive a fairly low amount of money that could restrict your standard of living. It's great to have a pension that's there for everyone, even those unable to save, but relying on the State Pension alone can lead to an uncomfortable retirement. Do you want to be watching every penny, wondering if you can pay the bills?

The State Pension isn't guaranteed to stay the same from now until you're ready to claim it. What's offered now might not be offered by the time you reach retirement age. The State Pension amount, or the age you can start claiming, could be adjusted at any time. 

What Is a Mis-Sold SIPP?

Anyone can fall victim to a pension scam. If you've been caught out with a mis-sold pension, it's nothing to be embarrassed about. It's very important that you seek help to put a stop to future pension fraud and try to get your money back.

Recognising pension scams can help you protect your pension pots. There are some signs that you might be dealing with a fraudster:

Pension Scams, Financial Advisor Cold Calling

It's illegal for a financial advisor to call you about your pension unless you've already agreed to have that conversation.

If someone calls and tells you that they'd like to discuss your pension or your retirement, alarm bells should be ringing. Companies that make unsolicited calls could face fines of up to £500,000.

Not all cold calls in the past were fraudsters trying their luck. Many cold callers were genuine advisors, trying to drum up new clients. Yet many fraudsters used this tactic, and it was hard for people to tell a genuine call from a potential pension scam, so all cold calling for this purpose is now completely illegal.

Pension Scams, Being Offered Free Pension Advice

Free pension advice is available from places like Pension Wise, but the offer of free pension advice is often a sign of a problem.

Genuine financial advisors need to make money for their work, so they'll typically charge for the time and effort that they spend on your specific case. If someone's offering free advice, giving their time for no gain, it's important to think about what they're getting out of the arrangement.

Pension scammers can get their money by controlling where you keep your pension funds. They can earn commissions from certain pension providers. They may suggest a pension product based on how much they'll earn, not on how it will work for you in the future and boost your retirement income.

If someone offers free pension advice, think about how they'll make their money. You could be the victim of a mis sold SIPP. Check that they're authorised and registered with the FCA before you engage with them. The Financial Conduct Authority will have details of anyone regulated to offer advice.

Can Someone Steal Your Pension?

Pensions are confusing. Even if you have a fund, likely, you don't truly understand it. The lack of clarity and understanding are neon lights for sneaky fraudsters. Like moths towards bulbs, fraudsters circle unwitting and vulnerable victims, and mis-sold pensions are unfortunately common.

Pension Scams Can Be Seen As Easy Money to Fraudsters

For fraudsters, mis-sold pension scams are an easy source of money. It's often as simple as directing a person to a different investment. They'll tell you that a different fund or product will serve you better, then they'll claim their commission when you've switched.

Pension fraudsters can make grand promises. It's very easy to get swept up in the promise of a bigger pension pot. Many scammers sound very professional, seeming like they know what they're doing, so it's easy for them to gain a victim's trust. Don't be ashamed if you've been mis sold a pension.

Government Legislation for Early Pension Access

Government legislation allows you to access your funds early. This can work in a scammer's favour since they can encourage you to access your retirement fund and withdraw cash from your pot. They can suggest the benefits of taking your money and spending it elsewhere, so your money might no longer be protected or kept safe in a secure SIPP.

Withdrawing funds early can result in very high tax charges. These can take more than 50% of the money you've withdrawn from your pension. In short, it's a good financial sense not to take your money out early.

Younger people can be encouraged to withdraw from their pension pots early, especially if they're told that the money would be better placed elsewhere. The problem is, as soon as it's withdrawn, it's subject to HMRC charges. You can transfer your pot without the need to withdraw it.

There may be times when younger people are going through financial struggles, wishing that they could access the money that they'd set aside for retirement. In almost all cases, this money should not be accessible until you reach retirement age.

Pension Scams & Fraudsters Target the Older Generation

Some older people are clued-up and savvy, but others can feel confused about their financial products. Older people are often more vulnerable, less able to search online for answers, and more likely to have illnesses and other concerns that mean pension planning takes a back seat.

Learning about your pension fund might not be your most immediate concern. Old age can creep up on anyone. Fraudsters can prey on those feelings of panic and urgency, taking advantage. Before you know it, it's time to act, and you're clueless about what comes next.

How Do I Know if I Was Mis-Sold a Pension?

Spotting a pension scam before it happens will help you to keep your money safe. There are some clues, and it helps to be aware of what's legal and what isn't.

Often, people don't realise they've been mis sold until it's already happened. We usually realise that something doesn't feel right once we've had time to sit and think. If you've already been caught out, it may not be too late to take action and get your money back. A mis sold SIPP isn't necessarily lost forever, but you need to register a complaint as quickly as possible.

Watch out for signs that whoever you're dealing with might not have your best interests at heart:

Pension Investment Scam Cold Calling

Since January 2019, pension-related cold calling has been illegal. Callers could be fined up to £500,000, whether they're involved in scams or not.

Many scammers seek new victims by visiting them at home, calling on the phone, and being the first ones to make their move. Unsolicited contact could catch someone off guard and make them agree to things that they otherwise might not. Since it was so difficult for people to tell a genuine call from a scam, it was decided that all pensions cold calling would be banned.

You should never be approached for a pension review or similar service. If you want to support or help with your pension plan, it's your job to seek it out. Otherwise, you may be someone else with a mis-sold pension.

If you receive a phone call you weren't expecting, refuse to deal with the company. You can report pension cold calling, so others don't become unwitting victims. Reports should be made to the Information Commissioner's Office by calling 0303 123 1113.

Pension Investment Scam Offering a Free Pension Reviews

Companies that offer free pension reviews might not have your best interests at heart. They'll earn commission by directing people to specific products and pension plans. Instead of finding out what'll benefit you most, they're likely to promote the products that they'll earn the most commission for.

If you've been offered a free pension review, check the Financial Conduct Authority's register to make sure that the company's reputable. You can also seek free pensions advice from the government's Pension Wise service.

How To Report a Mis-Sold Pension

If you've suffered from a pension scam, have a mis-sold pension, or you've just had a lucky escape, reporting the scam can help to put a stop to pension fraudsters. You could save others from the same fate and get support for what you've already been through.

Before you take action, it's vital that you contact your existing provider. If you've been fast enough, they may be able to cancel the transfer of pension funds.

You can contact Action Fraud if you think you've lost money through offline fraud or cybercrime. There are also other ways to report pension scams:

The Financial Services Compensation Scheme (FSCS)

The Financial Services Compensation Scheme protects consumers that have been victims of scams or pension fraud. You should be able to get compensation for the thousands you've lost as a fraud or pension mis-selling customer.

The FSCS can cover up to £85,000 of loss through failed pension investments if it's found that the investment was mis-sold or the holder was a victim of fraud. If the UK regulated pensions advisors have given bad advice to their clients, they might be required to pay compensation and make amends for their actions.

If you've lost out to pension fraud, all hope may not be lost. You may get some or all of your money back with the FSCS helping to reimburse victims of pension mis-selling.

The Financial Ombudsman Service

If you were given bad advice by a regulated advisor and feel you have a mis-sold pension, you could file a complaint with the Financial Ombudsman. The Financial Ombudsman Service will investigate to see if you're entitled to seek compensation for the advice you were given.

It's worth pointing out that the Financial Conduct Authority isn't the right party to take complaints to - they will direct you to the FSCS or Financial Ombudsman Service. The Financial Conduct Authority can tell you if a pension company is regulated, but they don't deal with complaints directly.

Money Savings Advice Tip

If you were approached by a financial advisor presenting an investment opportunity and you transferred your pension with the promise of high returns, you could be in line for compensation. Thousands of people lost money from their pensions that where invested in fraudulent investment schemes and there have been prison sentences handed down. Our tip is, speak to a mis-sold pension compensation specialist and see if you have a claim.

The Pension Investment Compensation Claim Process

If you've lost money due to mis-sold pensions, fraud, or pension scams, compensation can help make things right. Compensation ensures that you don't lose your hard-earned thousands. The compensation claims process can be daunting, but it's important that you get the money you deserve and should have already had.

Claiming Compensation for Losses Incurred From a Pension Investment Scam

If you received advice from a pensions advisor that's still working today, your first step should be to file a complaint with the Financial Ombudsman. They'll launch an investigation to see if you've received bad advice.

If the Financial Ombudsman Service finds in your favour, the company or advisor you used will be asked to set things right.

Speak to a SIPP Claims Management Company

If the advisor you used is no longer trading, you may still be entitled to financial compensation for your loss. It's best to speak to a compensation specialist who'll help you get the pension justice you deserve. As with every other financial provider, check that you're using a trusted and reputable specialist.

In these situations, your SIPP claim will be taken to the Financial Services Compensation Scheme.

The Cost of Making a Pension Investment Compensation Claim

Making a claim might be free to start with, though you'll typically lose a chunk of money based on the final compensation value.

Usually, a claims management company offers representation on a 'no win, no fee basis. There will be no up-front charge, but a percentage of compensation may be taken if your claim is successful. This is usually around 25%.

If you're able to claim through the Financial Ombudsman Service, there's a chance that your compensation will be paid to you in full. You can also speak to the Pensions Ombudsman - a similar independent organisation that deals with mis-sold pensions and can advise you on making a pension claim.

Do I Have To Pay Tax on Mis-Sold Pension Compensation?

No - you don't have to pay tax on the compensation you receive for SIPP or pension mis selling. It is exempt from tax claims.

Getting Back a Percentage of the Money Lost From a Pension Investment Scam

In some cases, you may only get a percentage of your money back. You may not be entitled to compensation for all that you lost, as it could be decided that any investment might have resulted in a loss.

If you've suffered from a SIPP scam or of pension mis-selling, you're right to feel aggrieved about the situation and to want your money back. Be prepared for the fact that you might not get back as much back as you first started with.

Investment Pension Scams: A Summary

If you've been the victim of pension mis-selling, you're certainly not alone. So many have also fallen for the false promises and exaggeration of a mis-sold SIPP. Whether they've accidentally mis-sold an investment opportunity or intentionally set out to deceive, pension advisors must take responsibility for your financial losses.

Pensions are tricky to manage, and most people aren't experts, but they're expected to handle a large amount of money and help it to grow as much as possible. You know that your future comfort depends on the value of your retirement savings, so you'd be forgiven for being swept up in false promises and poor advice.

Manipulative fraudsters target the vulnerable, so anyone growing older and concerned about retirement are easy pickings for the unscrupulous. If you've fallen prey to a scam or mis-sold pension, you may be entitled to compensation and can make a claim to get your cashback. You can do this yourself or use a claims management company if you want help on a no-win, no fee basis.

If you're concerned about pension scams but haven't fallen victim in the past, there are some easy ways to make sure that you don't get taken in. Never accept a cold call about pensions, and report one if you receive it. Always check the Financial Services Register for reputable companies, and do more research if something seems like it might be too good to be true. If you're careful, you can avoid a mis sold SIPP and stick with the help of experts who will look after your funds and help you with a responsible retirement plan.

How Can Money Savings Advice Help You With Making a Mis-Sold Pension Claim?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold pension and they can do the same for you.

Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.


Ignatius Uirab

Ignatius is one of our leading financial specialists. With over eight years of financial experience, he has vast experience and knowledge of the financial sector. When he is not writing about how to make your money go further, he is a true family man.

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