The Financial Conduct Authority (FCA) has raised concerns that rising costs could leave Brits vulnerable to scams, after research found that 25 per cent of savers would consider withdrawing money from their pension earlier than planned to cover the cost of living.

The FCA also found that 17 per cent of over 65s are still in work simply because they cannot afford to retire on their current pension, and over a third (37%), are not confident they have enough in their pension to last their whole retirement.

It also highlighted recent figures from HMRC, which revealed that a record £3.6bn was withdrawn in Q2 2022, while the number of pension plans accessed for the first time in 2021/22 increased by 18 per cent to 705,666, up from 596,080 in 2020/21.

The regulator warned that savers could be particularly vulnerable to misdirection scams, with emerging scam tactics using a similar strategy as magicians, diverting savers attention while the trick is carried out.

According to the research, around 44 per cent of savers would take up the offer of a free pension review, despite FCA identifying this as a "classic distraction tactic".

The FCA warned that scammers are also becoming increasingly skilled at producing fake websites and brochures as a distraction when carrying out their ‘trick’.

Despite this, 46 per cent of savers said that they would be reassured if a potential scammer getting in touch out of the blue could show them third-party verification, while 31 per cent would be reassured by positive reviews.

Pension misunderstandings are also leaving savers vulnerable, as the FCA found that
over half (54 per cent) of savers do not feel confident in how to grow their pot, and 38 per cent do not feel confident in understanding how pensions work.

In light of the findings, the FCA has urged consumers to be 'Scamsmart' and check information on the FCA and Scamsmart website before making any decision about their pension.

The regulator also identified a number a number of tactics that savers should be aware of, including: the offer of a free pension review, promises of higher returns, high-pressure sales tactics, and unusual investments or complicated structures.

FCA executive director of enforcement and market oversight, Mark Steward, commented: “Many of us have sat in awe as magicians make things disappear right in front of our eyes, despite us thinking we are in control, or can see everything going on.

“But the trick ends there, and we can enjoy the rest of our night. That doesn’t happen with pension scams. The rising cost of living is affecting people at all savings levels, and pension scammers are taking advantage of this.

“Misdirection in this context means victims are lured in with the promise of a better lifestyle in retirement, or to support their living costs with pension savings. The scam then takes place right in front of their eyes, and it means thousands can be lost, for good.

“It’s important that consumers stay alert to these tricks, and visit ScamSmart to protect themselves before the sleight of hand can begin.”

AJ Bell head of retirement policy, Tom Selby, added: ”As inflation tightens its grip on Brits’ finances and millions of households face up to the prospect of spiralling mortgage bills as interest rates rocket, it is inevitable scammers will increase their activity as they look to prey on rising vulnerability.

“This combination of vulnerability and rising numbers of people accessing their retirement pots is like blood in the water to fraudsters, who will often employ Derren Brown-style con tricks and misdirection to exploit people’s lack of confidence and understanding of pensions.”

“The more people are aware of the kind of tricks financial scammers use, the less likely they will be to fall for these sorts of tactics."

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