In recent months we have commented upon the considerable increase in the incidence of pension scammers trying to use Small Self Administered Schemes as a means of fooling unwary investors into losing their savings. This article looks at how these scams work and recommends 5 key ways of spotting SSAS scams.
Types of SSAS scams
There are several types of scam around. In this one, the scammer convinces a potential investor to transfer funds from a legitimate scheme into what looks like a perfectly sound SSAS, which is, in fact a fraudulent one. The scenario takes the following course:
- Firstly, a proportion of the newly invested funds are paid direct to the pension investor in the form of ‘cash back’ or a ‘non-repayable loan’.
- It is likely that HMRC could consider that either of these are unauthorised payments. If that is the case, then the individual could well be hit with hefty tax charges, through no fault of their own.
- The next stage is that the scammer recommends investing the remainder of the funds into a non-mainstream investment, but with the enticing promise of high guaranteed returns.
- Nothing much then happens until, 12 months later, the investor tries to make contact for the annual review to see how the investment is performing. This proves impossible because the the scammers have disappeared, along with the individual’s pension funds.
The data shows that transfers to SSASs were more than double when comparing 2015 with 2014. This does not mean, that all of this increase is due to SSAS scams. Far from it. The stimulus was, of course, the introduction of pension freedoms. However, vigilance is important. Here are 5 things to look out for in spotting potential scammers.
How Long Has The Receiving SSAS Been Established?
If the SSAS you are being encouraged to transfer into has been established and registered with HMRC for less than twelve months it’s worth checking its validity. This can be done by requesting to see the trust deed. You can verify the date of establishment from the trust deed. If the scheme administrator cannot provide a copy of the HMRC registration letter, you should be suspicious.
Look out for the Cold Caller
If you have been cold-called, e-mailed or texted by someone offering guaranteed returns on a ‘too-good-to-miss investment opportunity’ basis, alarm bells should ring. These messages can be very professionally presented. However, legitimate and professionally accredited and regulated advisors do not promise guaranteed returns.
Can Your Find Any Evidence of the Company Behind the SSAS?
One of the first things you should do is search online to find evidence that the company behind the SSAS has actually traded. Have they got a website, a LinkedIn profile? Do they have a listing on the Companies’ House website?
If you can’t find anything, it doesn’t mean they don’t exist, but it should certainly signal that you proceed with caution and do more research.
What About the Scheme Administrator?
If there is a company involved as the scheme administrator, but they are not a trustee of the scheme, then that should raise your suspicions. This is because a scammer will typically look to avoid taking on this time-consuming and onerous responsibility. The presence of a professional trustee is usually a good sign.
What About The SSAS Adviser?
A SSAS is a complex financial product and you should expect the company advising you to be registered with the Financial Conduct Authority.
Contact us About SSAS Scams
Here at PML we specialise in SSASs, and we’re regulated by the FCA too. If you’re worried that a SSAS you are being encouraged to transfer your pension funds to might be a scam, contact us or call us on 0121 693 0690. We’ll be happy to help.