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. Throughout our adult working lives, we set money aside for retirement. We hope that when we reach retirement age, the money we’ve saved and put into a pension 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.

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The Different Types of Pensions Available

There are many different types of pension to choose from. Some people have more than one. It’s very important to understand your pension and know what contributions you’re making. Having the wrong type of pension can cause problems when you reach retirement age.

You might have a pension through your employer but also have a separate private pension to maintain on your own. 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 pot for a fee.

Many people choose a personal pension 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 personal pension 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, a state pension 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.

State pension amounts are frequently changing, though 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 pension 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 Pensions

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 pot 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 Happens if You Have Big Retirement Dreams?

Whether you dream of a retirement full of cruises and holidays, or simply the comfort of life at home without worrying about your heating bill, you'll have a goal for later life.

Pension savings can help you achieve your retirement dreams, however big or small. The more you can save, the more likely you are to live the later life you've always wanted.

Many people envision a happy retirement with cruises and lengthy beach holidays. They dream of having money to treat their grandchildren, keep pets and maintain a lovely garden. If you have big retirement dreams, whether you plan to skydive or renovate your home, you'll need the income to fund them.

What Are the Benefits of a Pension?

A pension offers financial security in your later years. Whether you choose to keep working or stop completely, it's money that you can use day-to-day when you're no longer able to do as much as you used to.

As you get older, it can be harder to find jobs you're able to do. It's reassuring to know that your advancing age, and potential ill health that may come with it, will not stop you from being able to afford the essentials you need.

People that save the most for retirement get to live more comfortable lives. A good pension pot can lead to yearly cruises and weekly drinks with friends at cocktail bars, whilst someone that hasn't saved for retirement might struggle to maintain their home.

Understanding Pension Scams Is Key To See if You Have a Compensation Claim

Anyone can fall victim to a pension scam. If you’ve been caught out, 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. Someone might not have your best interests at heart if they stand to make financial gains from commission payments. 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. Check that they’re authorised and registered with the FCA before you engage with them.

Why Do Fraudsters Love Pension Scams?

Pensions are confusing. Even if you have a pension fund, it’s 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.

Pension Scams Can Be Seen As Easy Money to Fraudsters

For fraudsters, pension scams are an easy source of money. It’s often as simple as directing a victim to a different pension 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.

Government Legislation for Early Pension Access

Government legislation allows you to access your pension early. This can work in a scammer’s favour since they can encourage you to access your pension and withdraw funds 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 pension pot.

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 pot. 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 somewhere else. The problem is, as soon as it’s withdrawn, it’s subject to HMRC charges. You can transfer your pension 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 might not be your most immediate concern. Old age can creep up on anyone. Before you know it, it’s time to act, and you’re clueless about what comes next. Fraudsters can prey on those feelings of panic and urgency, taking advantage.

Different Pension Scam Types That You Can Claim Compensation From

There are many different types of a common pension scam, though you might find that a fraudster tries something completely different. Knowing the most commonly used pension scams can help you to identify a fraudster, but don’t assume that someone’s acting in your interests if they’re using a less well-known approach.

Often, pension scams are being led from somewhere further down the line. A well-meaning advisor might suggest an investment that they think could be good for you, even if they don’t fully understand how you’re going to get your money back.

German Property Pension Investment Scams – Dolphin Trust

The German Property pension scam invites you to invest in the development of German property. If you have a SIPP, you’re free to invest your money in whatever you want. You might be told that German property is a great project to invest in. You’ll be promised great returns on your investment, but those returns might not ever reach your pockets.

It’s true that the German government has encouraged property development. Many run-down buildings can be bought cheaply, then renovated so that they’re worth more. Unless you’re an experienced property developer, ready to take the steering wheel, throwing your money at foreign property development is a very risky way to try and grow your pension pot.

In the early 2010s, even well-known approved financial advisors were recommending German property investment. One company promised great returns on investments, and many were swept up in those promises. It wasn’t until late 2018 that people realised they weren’t getting money back. An investigation found that the company they were investing in – The Dolphin Trust or German Property Group – had suddenly gone very quiet.

German property investment is still offered as an option today. It’s wise to be cautious unless you want to fall victim to the same scam.

Burial Plots Pension Investment Scams

Investing in burial plots may seem unusual, but this money-making scheme has also been used as a pension scam. As time goes by, cemeteries are sadly filling up. There’s no longer enough space in many town and city graveyards for everyone that wishes to be buried. The price of burial plots has, naturally, risen to reflect their short supply.

Private investors are encouraged to lease a burial plot. They’ll pay for the land, then later can sell it at a profit when someone needs it. You may have been told that this investment would be used to build your pension pot. If you invest in a plot, there’s a risk that the cemetery may not been created. Alternatively, there could be another reason why your plot won’t make a profit. You could be left with nothing or with far less than you invested.

Cape Verde Pension Investment Scams – Resort Group

The Cape Verde pension scam involved investment in overseas property. Those involved were encouraged to invest their money in beautiful holiday rooms and suites on an African island. It all sounds bright, sunny, happy, and incredibly positive. In fact, these property investment plans were mis-sold.

Instead of owning property, investors would own just a fraction. Their property would be shared with others, rather than being theirs outright. Despite this, investors often became personally responsible. They were required to sell their share of the property, with very few willing buyers for a fraction of a hotel room. Of course, property sale comes with its own expenses that investors might not have expected they’d need to cover. In many cases, these properties were never built or became a huge burden instead of a benefit.

Green Energy Pension Investment Scams

We all want to do our bit for the planet and contribute to a cleaner environment. Investing in green energy should make you feel positive, not leave you with doubts and concerns. Unfortunately, many people invested and expected big returns for their decisions. They didn’t understand the potential risks and were mis-sold the dream of a swiftly growing pension pot.

Carbon Credit Pension Investment Scams

If you were involved in a carbon credit scam, you might have been asked to invest your money in carbon credit certificates. These would allow the certificate holder to emit one tonne of carbon dioxide (CO2), making these documents a sought-after commodity in the business world.

Investors in carbon credit certificates might have been told that they were investing in a very valuable project. They’d be reducing the number of greenhouse gases in the atmosphere, doing their bit for the planet. In fact, the whole idea of carbon credit fell almost as quickly as it started. Companies abused the carbon credit scheme, and the certificates quickly lost value.

How To Spot a Pension Investment Scam

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 scammed 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.

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 people 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, it’s your job to seek it out.

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 Pension Investment Scam

If you’ve fallen victim to a pension scam or 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 pension 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 money you’ve lost as a fraud or pension mis-selling victim.

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 pension holder was a victim of fraud. If the UK regulated pensions advisors have given bad advice to their clients, they may be required to pay compensation and make amends for their actions.

If you’ve lost out as a pension fraud victim, all hope may not be lost. You may get some or all of your money back.

The Financial Ombudsman

If you were given bad advice by a regulated advisor, you could file a complaint with the Financial Ombudsman. The Financial Ombudsman will investigate to see if you’re entitled to seek compensation for the advice you were given.

The Financial Ombudsman offers an impartial service. They’ll consider statements and evidence from both sides, coming to a fair conclusion based only on the facts. The Financial Ombudsman will either find in your favour, requiring the financial advisor to put things right or will explain why they feel you haven’t lost out.

The Pension Investment Compensation Claim Process

If you’ve lost money as a result of mis-sold pensions, fraud, or pension scams, compensation can help to make things right. Compensation ensures that you don’t lose your hard-earned money. 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 finds in your favour, the company or advisor you used will be asked to set things right. The Financial Ombudsman will make it clear what action must be taken at this point. They’ll calculate the required compensation amount.

Speak to a Pension Investment Scam Compensation Specialist

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 money you deserve. As with every other financial provider, check that you’re using a trusted and reputable specialist.

In these situations, cases are taken to the Financial Services Compensation Scheme. You’ll need good representation to make sure that your case is dealt with correctly or in-depth knowledge of the situation and evidence to back up your claims.

Writing Your Own Letter

You have the option of writing your own letter, as a first step or instead of a completely different route. If you’re writing your own mis-sold pensions letter, the right wording is very important. You must make it clear why you believe a pension product was mis-sold. You’ll need to show that your advisor was negligent before you can claim compensation. In order to improve your chance of success, gather as much evidence as possible.

You could state that the advisor you worked with failed to explain the risks of an investment they’d suggested. You could also argue that they didn’t consider your personal financial situation or that they made a promise of results that never came to fruition. You may also have been a victim of fraud if the advisor’s fees, or other costs, weren’t fully and properly explained.

You can claim compensation up to three years from the date that you became aware that your pension was mis-sold. You’ll need to act quickly, but don’t rush as you may risk leaving out essential evidence or detail.

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 were 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 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, companies offer 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%, so it’s very important that you know what you’ll be charged, and you’ve taken this into account.

If you’re able to claim through the Financial Ombudsman, there’s a chance that your compensation will be paid to you in full.

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 the money that you lost, as it could be decided that any investment might have resulted in a loss.

If you’ve been the victim of a pension 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 money as you first started with.

Investment Pension Scams: A Summary

If you’ve been the victim of pension fraud, you’re certainly not alone. So many people have also fallen victim to false promises and exaggeration. 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. Many of us know that we should save for our retirement but don’t truly understand what that entails. We’ll choose pension providers based on convenience and then move the funds if somewhere else sounds better. Most people aren’t expert investors, 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 pension pot, so you’d be forgiven for being swept up in false promises and poor advice.

Manipulative fraudsters target the vulnerable, so people 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 money back.

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.

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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