While the new pensions freedoms have been welcomed by many, some have raised concerns about the prospect of retirees being scammed out of their hard-earned pension pots. While this is a possibility, it’s worth remembering that the days of buying annuities had their own challenges, with people realistically looking at a seriously-impaired quality of life if they went for an inappropriate provider. Those on the verge of retirement were, therefore, regularly advised to shop around for the best deal. Similar logic applies in the light of the new pensions freedoms, caveat emptor, let the buyer beware. Here are some useful pointers to avoid being parted from your money.
1. Get to know the provider thoroughly before you part with your cash.
In the old days, it was standard advice never to be pressurised into giving details to a cold-caller. This is still good advice, but in this age of e-mail and internet, you need to be cautious about digital communications too. In particular look out for any e-mails which purport to come from financial services companies, including ones with which you already do business. Check the actual e-mail address (it’s often easy to spot scam e-mails just by looking at this) and avoid clicking any links in the actual e-mail. If it says it’s from a particular company and you think it is, go to the company’s website and find the information yourself or use an external, reputable, telephone directory to find the company’s number and call them. Even when you’re happy that you know the identity of the person you’re dealing with, make sure you thoroughly understand any deal on offer before parting with your cash.
2. Never let yourself be rushed into anything
If a deal’s good today then why would it stop being good tomorrow or next week or even next month? If someone’s trying to pressurize you into acting quickly, you have to ask yourself why. There’s a huge difference between buying tickets to the must-see event, which is guaranteed to sell out quickly and investing a pension pot to create an income which will last you for the rest of your life.
3. Be very suspicious of changes to established services
Companies in general (and financial services companies in particular) tend to give their customers as much notice as possible with regards to changes in their service. This is especially true when it comes to anything involving customers being able to send money to them. If you receive any communication purporting to be an urgent change to an established service then you should verify it directly with the provider by phone (or face to face). If you receive an e-mail advising you of a change in bank-account details then you absolutely must verify it before making any payment into it as there is a distinct possibility it is a scam.
4. Understand the rules around pension funds
Making sure you understand the ground rules of pension funds can help you to make better-informed decisions, which will also help you to avoid scams. For example, if anyone says (or even implies) that they can make it possible for you to access your pension pot before the age of 55, then alarm bells should start ringing immediately. As always, if a deal sounds too good to be true it probably is.
5. Be aware of the risks of unusual investments
There can be a very fine line between high-risk investment and scam, in fact it can arguably boil down to the provider’s intentions. You may be prepared to use part of your pension pot for a bit of a gamble in the hope of achieving the highest returns, but be ready to investigate such investments very thoroughly so that you are totally aware of (and comfortable with) the time-scale and element of risk.