Learn how to spot the signs of pension scams and ways to avoid losing your retirement savings without missing out on suitable opportunities.
Learn how to spot the signs of pension scams and ways to avoid losing your retirement savings without missing out on suitable opportunities.
Today, more than ever, there is a range of choice when it comes to what you can do with your pension. An unwelcome side-effect of this freedom is an increasing number of scams targeting people with pension savings.
One option open to British expatriates is to transfer their UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS). For many people this is a suitable way to bring their pension with them when they relocate. However, it is by no means a ‘one size fits all’ solution. It is also a common focus for scammers looking to defraud people out of their pension savings. It is crucial to look at all your options and seek regulated, personalised advice when considering a QROPS or any other pension transfer.
How common are scams?
If you think you are unlikely to be affected by a pension scam, think again. Scamming attempts are not only widespread, their tactics can be extremely sophisticated and convincing. Citizens Advice in the UK estimate that 11 million people have received unsolicited calls or texts about pension services in the last year alone… and it is not just ‘gullible’ people at risk. In their survey, only 12% of people who were confident they would be able to spot a scam were able to do so. That means that nine out of ten people missed the common warning signs of a pension scam.
How can you spot a scam?
Citizens Advice UK found that two in five pension scams start with a cold call or text, but they can also stem from unsolicited contact in person, online or through the post. Tell-tale signs include offering a free pension review, opportunities to access your pension before the age of 55 or unusually high and guaranteed returns.
Generally, if it sounds too good to be true, it probably is, and once you transfer your pension, it is too late. You could end up losing some or even all of your pension savings, and face a large tax bill as well as penalty fees.
Something else to be aware of is that many companies offering QROPS services are unregulated. While they may not all necessarily be scams, the reality is that these are unprotected investments that risk losing your money, whether they aim to defraud you or not. Remember, with unregulated companies there is no recourse when things go wrong.
How can you protect yourself from scammers?
You should always be extremely suspicious of anyone contacting you out of the blue about your pension arrangements. Before giving out your personal details, you should thoroughly research any person or company that approaches you. A simple Google search can reveal whether an adviser is regulated or on any warning registers. You could also search for consumer reviews, ask around your local community and follow up any references. In any case, be careful not to sign anything under pressure, unless you fully understand what you are getting into.
The UK’s Financial Conduct Authority (FCA) recommend you should take regulated advice on any decisions to do with your pension. Despite this, a survey from the Observer and insurer LV= (Liverpool Victoria) found that only one in five people within five years of retirement plans to do this, and as a result risk losing or running out of pension savings early.
It is vital to speak to a regulated adviser who will carry out a high level of due diligence when recommending options tailored for you. They should outline your full range of options, not only QROPS, to establish the best pension solution for your particular circumstances.
If you decide that a QROPS is right for you, you will need specialist guidance to find a suitable product and navigate the complex tax and jurisdiction issues. You need to consider the legislation, restrictions and investment environment of the jurisdiction in which the QROPS is based, as well as how the product is structured and who the provider is. When it comes to how you will be taxed, an adviser can help you understand the tax implications in the jurisdiction, the UK and in your country of residence.
Remember, whether you are a British resident or an expatriate, you should use a provider that is authorised and regulated for the conduct of pension business by the UK’s Financial Conduct Authority.
For many expatriates, their pension savings play a key role in determining their lifestyle and financial security through retirement. Getting it wrong could have serious consequences. As with any investment, it is important to ensure that the underlying funds in your pension scheme are suitable for you, your risk profile and objectives.
It can only take a moment to lose a lifetime of savings but with careful planning and professional advice you can both protect and make the most of what you have.
Any questions? Ask our financial advisers for help
This article should not be construed as providing any personalised taxation and/or investment advice. All information contained in this article is based on Blevins Franks’ understanding of legislation and taxation practice, in the UK and overseas at the time of writing; this may change in the future.
