Pension Scams: Warning Signs and What to Do
A pension is often the second-largest asset a person owns after their home, and it is frequently the least closely watched. That combination makes it a target. The Pensions Regulator reports that losses from pension fraud totalled £17.5 million in 2024, with an average loss of around £34,000 per person. The true figure is almost certainly higher, as many victims do not discover the problem for years and some never report it at all.
The encouraging news is that pension scams follow recognisable patterns, and the law now gives pension schemes real power to intervene. Knowing what to look for and what your provider is obliged to do is most of the protection you need.
How a pension scam usually unfolds
The approach rarely appears fraudulent. It typically begins with unexpected contact, an offer of a free pension review, and a friendly, professional conversation about how your existing pension is underperforming. This is followed by a recommendation to transfer, often into a scheme controlled by the fraudster.
Once the money has moved, it is invested in unusual assets such as overseas property, forestry, storage units, care homes, biofuels or businesses you may not be familiar with. Layers of fees are deducted along the way, sometimes by several parties. Because these are presented as long-term investments, it can be several years before anything appears to be wrong.
The warning signs
The Financial Conduct Authority identifies a consistent set of markers: a guaranteed better return on your savings, high-pressure sales tactics, unusual investments that tend to be unregulated and high risk, complicated structures where it is unclear where your money ends up, and several groups, some of them overseas, all taking a fee.
To that list, add the language fraudsters use. The Pensions Regulator warns about terms such as "pension liberation", "loan", "loophole", "savings advance", "one-off investment" and "cashback", as well as time-limited offers and couriers waiting while documents are signed.
Perhaps the most useful single rule concerns free reviews. As the FCA puts it plainly, professional pension advice is not free, and most companies offering free pension reviews are not authorised, although many falsely claim they are. Some go further, claiming to act on behalf of the FCA or MoneyHelper. The Pensions Ombudsman has also had to publish guidance because criminals impersonate it when attempting to defraud the public.
Cold calling and the law
Unsolicited marketing calls about pensions have been banned since January 2019 under the Privacy and Electronic Communications Regulations. The ban is not absolute: a call is permitted if the caller is FCA-authorised or is the trustee or manager of a pension scheme, and you have either consented or are an existing client. In practice, if you did not ask for the call, it should not be happening. The FCA's advice is clear: if you get a call out of the blue about your pension, the safest thing to do is hang up, and offers arriving by email or text should be ignored.
The ban applies to calls rather than to emails and texts, which are governed by separate consent rules. Pension cold calls can be reported to the Information Commissioner's Office, which enforces the regulations.
The real cost of getting at your money early
Any offer to release cash from a pension before age 55 should be treated as a scam until proven otherwise. Money can generally be taken from a pension from age 55, except in certain cases such as poor health, and this rises to 57 from 2028. Some savers hold a protected lower pension age, so there are genuine exceptions, but they are rare and will already be documented in your scheme paperwork.
The tax position is what makes early release so damaging. You could face a tax bill of up to 55% on the amount you withdraw, and that applies even if you did not realise you had broken the tax rules, put the money back into your pension, paid fees to the company involved, or have already spent it. On top of that, the company arranging it may charge a fee of up to 30%. A saver can therefore end up with a fraction of the pot and a substantial HMRC liability.
Why your provider may pause a transfer
Since November 2021, the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 have required trustees and scheme managers to check transfer requests against a list of scam indicators. A red flag removes the statutory right to transfer, while an amber flag suspends it until the member can show they have taken scam-specific guidance from the Money and Pensions Service.
This significantly altered the legal landscape. In Hughes v The Royal London Mutual Insurance Society Ltd [2016] EWHC 319 (Ch), the High Court held that a member had a statutory right to transfer, even where the receiving arrangement was suspected of being a liberation vehicle. Providers were, in effect, obliged to hand over the funds. The 2021 regulations were the legislative response to that problem.
If your transfer is delayed and you are asked to attend a guidance appointment, the system is working as intended rather than being obstructed. It is worth engaging with rather than circumventing.
A particular risk for company directors
Small, self-administered schemes are a legitimate and useful arrangement for company directors, offering considerable investment flexibility. That flexibility has attracted abuse. The Department for Work and Pensions has highlighted emerging evidence that some savers have been exposed to high-risk or unregulated practices, including the misuse of dormant SSASs, investments in non-standard assets, and arrangements that seek to present pension liberation activity as legitimate investment opportunities.
If you are a director being encouraged to set up or revive an SSAS by someone who approached you, rather than by your own accountant or adviser, treat this as a warning sign. The employment link between the member and sponsoring employer is an important safeguard. The Government's 2026 consultation specifically proposes making the absence of such a link a red flag for transfers to an SSAS, reflecting concerns about the use of some SSAS arrangements in pension scams.
Changes on the horizon
Two developments are worth noting, both of which are steps in progress rather than settled law.
First, the DWP consulted on amending the 2021 transfer regulations between June and 21 July 2026. The proposals include abolishing the overseas investment amber flag, removing the need for checks on transfers to "reputable" schemes, and introducing a new red flag for transfers to small self-administered schemes with no employment link, together with an exemption for members who have taken Money and Pensions Service guidance within the previous 12 months. None of this is yet in force, and the final regulations may differ from those consulted on.
Second, the Pension Schemes Act 2026 creates the framework for automatic consolidation of small dormant pension pots. It provides for regulations under which eligible dormant pots of £1,000 or less in automatic-enrolment schemes can be transferred to authorised consolidators. The detailed rules and implementation timetable will be set through regulations. Legitimate consolidation communications will therefore become more common in the years ahead, exactly the environment in which impersonation thrives. Verify who is contacting you, whatever the letterhead says.
Checks worth making before you move anything
Before any pension money moves, check the firm on the Financial Services Register or through the FCA's newer Firm Checker, which makes it easier to confirm whether a firm is authorised and has permission for the service it is offering you. That second point matters: a firm may be authorised for one activity but not for the one it is discussing with you. Check the FCA Warning List as well.
Use contact details taken from the Register itself, not from the caller or their website. Clone firms trade on genuine firms' names and reference numbers, and a convincing website is very cheap to produce.
If you are over 50 and have a defined contribution pension, you can book a free Pension Wise appointment via MoneyHelper.
Whatever you do, follow the FCA's rule on advice: never take advice from the company that contacted you, as it may be part of the scam.
If you think you have already been scammed
Contact your pension provider or scheme trustees immediately. If a transfer is still in progress, it may be possible to halt it.
Report the matter to Report Fraud, which replaced Action Fraud in December 2025 for England, Wales and Northern Ireland. It can be reached online or on 0300 123 2040. You should also report unauthorised advice to the FCA and pension cold calls to the ICO.
Be alert to the second wave. Victims are often approached again by people who offer to recover the lost money in exchange for an upfront fee. This is a separate fraud targeting the same person.
Where the law may help
Recovery is difficult but not always impossible, and the route depends on who was at fault.
If a scheme transferred your pension without carrying out proper due diligence, you may be able to complain to the Pensions Ombudsman. If an FCA-regulated firm gave negligent advice, the Financial Ombudsman Service can consider a complaint. If such a firm has failed altogether, the Financial Services Compensation Scheme may pay compensation, generally up to £85,000 per person per firm for investments and most pensions. The higher £120,000 limit that came into force in December 2025 applies only to money held in bank, building society and credit union accounts, and does not extend to pensions. However, protection can be 100% with no upper limit where the pension was provided by a life insurer that fails.
Deal with an unauthorised firm, and none of this is available to you, which is the strongest practical argument for checking the Register first.
Civil claims against advisers and introducers may also be possible. Timing is critical. The Limitation Act 1980 generally allows six years, though the period can be extended where there has been fraud or deliberate concealment, which is often the case in these matters. Where funds have moved recently and can still be traced, urgent applications may be worth considering, but that window closes quickly.
Before you sign anything
The single most effective protection is the least dramatic: slow down. Nothing legitimate about your pension requires a decision this week, and no genuine adviser will object to your taking time to check them out.
If you have been approached about your pension and something feels off, or if you have already transferred and are struggling to get clear answers about where your money has gone, get in touch with your solicitor. Early advice preserves options that later advice cannot.