Protecting pension savers—five years on from the pension freedoms: Pension scams Contents


1.In 2015, many people aged 55 and over were given more choice about how they access their pensions, which led to wholesale changes in the industry and the way people plan to use their pensions. Five years on from these changes, known as the pension freedoms, we have started a major piece of work looking at how pension savers are protected. This is the first of three planned reports and focusses on protecting pension savers from pension scams. Our future reports will look at how savers access their pensions and saving for later life.

2.People with a defined contribution (DC) pension build up a pension pot, the value of which depends on the amount of money contributed by the person and their employer, and the performance of investments. Before April 2015, most people with DC pensions were required to buy an annuity—a form of guaranteed income. The pension freedoms gave them more choice about how they access their pension savings. People aged 55 and over can still use their DC pension to buy an annuity, but they can also take their whole pot in cash, leave their funds invested while withdrawing an income from the pot (known as “drawdown”), or leave the whole pot untouched.

3.Most of us are at risk of becoming victims of a pension scam. The evidence we received suggests that overconfidence from people that a scam cannot happen to them is a serious concern. According to research by the Pensions Regulator and Financial Conduct Authority “the more highly educated a person, the more likely they are to fall for a pension scam.”1 During our inquiry we were contacted by many victims of pension scams, both before and after the pension freedoms. These people’s experiences have significantly influenced our report and the recommendations we made. We are not in a position to take any action on or make recommendations about any individual cases. We hope, however, that our recommendations will help past victims and prevent future scams.

4.We have heard about several different types of pension scams. Scammers may use only one of these approaches or mix and match them in the same scam. Some of the scams most frequently raised with us in evidence are:

a)Liberation: A scammer makes false promises to encourage someone to access their pension before the age of 55. This usually leaves the victim facing a large tax bill.

b)Investment: A scammer persuades someone to transfer their pension with the prospect of unrealistically high returns on overseas or other investments.

c)Review: A scammer seeks information about a pension or to make contact for a further scam by offering a ‘free’ review of pension savings and returns.

d)Advice: A scammer offers free advice with the aim of obtaining information, authority to transfer a pension, or to act as a lead for another pension scam.

e)Transfers: An adviser, possibly unregulated, recommends a transfer to either a scam or genuine scheme against client interests in order to receive a fee.

f)Misadventure: A fund or asset manager may invest in a different way to what the saver was led to believe, exposing them to higher risks that they are unaware of and would not willingly take.

g)Hidden charges or conditions: Firms or individuals involved in a pension that hide and do not seek consent for fees or terms that would be considered unreasonable.

h)Claims management scams: A secondary scammer targets pension scam victims with offers to reclaim their lost money for a fee.

5.There is not a clear line which separates pension scams from other types of investment or financial fraud. We have therefore dedicated a section of this report to discussing the definitions of pension scams in more detail. Deciding on where the line is, or even if there is a line at all, is not an entirely academic exercise. There are many overlapping organisations involved in preventing and responding to pension scams; defining the issue they are dealing with will determine the response they choose. We were told that often in the past only liberation scams have been considered in discussions about pension scams.

6.The pension freedoms opened up a much wider range of investment choices to pension savers. Pauline Smith, Director at Action Fraud, told us “Instead of taking a pension from one scheme into another scheme, we are now seeing that people are getting targeted to use their pension to, say, invest in fine wines, diamonds or the environment.”2The Pensions Policy Institute, an independent expert research organisation, told us that “Since the introduction of pension flexibilities, there has been a shift towards investment-focused scams”.3 Tim Fassam, Director of Government Relations and Policy at the trade association the Personal Investment Management and Financial Advice Association (PIMFA), said that the distinction between pension scams and other investment fraud is “relatively moot” over the age of 55 as there “are pools of money that can be moved around in very similar ways.”4

7.The difficulty in drawing a dividing line between pension scams and other investment fraud was further highlighted by evidence submitted to us on behalf of groups of people who have lost savings intended for retirement, but not all necessarily directly from pension schemes, including the Premier FX Liquidation Committee5 and Coburn Corporate Intelligence.6 We also heard from groups raising cases in which the actions of their employer or the Government are perceived to have led to lost pension savings, including the Midland (HSBC) Clawback Campaign7 and AEA Technology Pensions Campaign.8 Issues relating to the management of schemes, not set up or used primarily for the purpose of a scam or misleading savers, cover a much wider range of topics than we are able to address in this report and much of the evidence we gathered is not applicable to these cases.

8.There are many bodies involved in the response to pension scams, either through prevention, investigation or enforcement. The key bodies relevant to our report are shown in the table below, but this is not an exhaustive list and responsibility for scams crosses many Departments and public bodies.

Table 1: Bodies involved in the response to pension scams



The Pensions Regulator

The Pensions Regulator is responsible for regulating trust-based occupational pension schemes and employers’ automatic enrolment duties.

The Financial Conduct Authority (FCA)

The FCA is responsible for regulating contract-based personal pensions. It is also the conduct and prudential regulator for firms that provide supporting products and services for pensions, such as advice and asset management.

Project Bloom

Project Bloom is a multi-agency task force set up to tackle pension fraud in 2012. It is chaired by the Pensions Regulator and other partners include the Financial Conduct Authority, Department for Work and Pensions, HM Treasury, the Pensions Advisory Service, the Pension Scam Industry Group, the Insolvency Service, the Information Commissioner’s Office, the National Economic Crime Centre and the National Fraud Intelligence Bureau. It is not a statutory body and receives no dedicated funding.

Action Fraud

Action Fraud is the UK’s national reporting centre for fraud and cybercrime. The City of London Police is designated as the UK’s lead force for economic crime. Since 2014 this has included the National Fraud and Cyber Crime Reporting Centre, known as Action Fraud.

The Pensions Ombudsman (TPO)

TPO investigates and determines complaints and disputes concerning occupational and personal pension schemes.

Financial Ombudsman Service

The Financial Ombudsman Service can consider complaints about FCA-regulated businesses including pension transfers, and personal pensions and SIPPS.

HM Revenue and Customs (HMRC)

HMRC is responsible for enforcing tax legislation and tackling tax avoidance.

Information Commissioner’s Office

The Information Commissioner’s Office has been responsible for enforcing the pensions cold-calling ban, which was introduced in January 2019.

Police service

The police service investigates and has powers for criminal prosecution of people who commit fraud.

Serious Fraud Office

The Serious Fraud Office investigates and prosecutes serious cases of fraud, bribery and corruption.

9.Five years on from the introduction of the pension freedoms, regulations are still adapting. Later in this report we discuss changes to the right to transfer introduced by the Pension Schemes Act 2021 and the work going on still to deliver the guidance promised alongside the pension freedoms. In March 2020, Andrew Bailey, the then CEO of the Financial Conduct Authority, was asked about the pension freedoms by the Treasury Select Committee during his pre-appointment meeting for Governor of the Bank of England. He said “Whether they were good, bad or indifferent, they were introduced too quickly. It feels, again, that we have been on a catch-up process as a regulator.”9

10.People save for retirement and later life in many different ways, not solely through their pensions. During the course of our inquiry we have been contacted by a number of people who have lost savings, other than pensions, which were intended to support them in retirement.

11.The pension freedoms gave people more choice in how they use their money to meet their own needs. However, by offering pension savers access to a much wider range of investments, the freedoms also removed much of the distinction between pension scams and other types of investment and financial fraud. More than five years on from the introduction of the pension freedoms, the Government and the regulators are still putting in place the necessary support framework to protect pension savers. They must now act quickly and decisively.

12.We recommend that DWP should publish details of its plans to co-ordinate work with the Treasury to combat pension scams as a matter of urgency. Following the introduction of the pension freedoms there is now less practical distinction between the areas of Treasury responsibility, including investments and advice, and DWP’s role in combatting pension scams.

1 The Pensions Regulator, 22 years of pension savings gone in 24 hours, 8 November 2019

3 The Pensions Policy Institute (PPS0034)

4 Q21

5 Premier FX Liquidation Committee (PPS0075)

6 Coburn Corporate Intelligence Pty Ltd (PPS0077)

7 Midland (HSBS) Clawback Campaign (PPS0002)

8 AEA Technology Pensions Campaign (PPS0025)

9 Treasury Select Committee, Appointment of Andrew Bailey as Governor of the Bank of England, 4 March 2020,Q21

Published: 28 March 2021 Site information    Accessibility statement