Fortunately for teachers, there is little chance of you falling prey to scams, as the money within the teachers’ pension scheme is non-transferable. However, if you have an Additional Voluntary Contribution (AVC) fund, it is possible that you could be encouraged to use these funds in a way not helpful to you. There are Self-Invested Personal Pensions (SIPP), and someone may suggest you transfer your AVC funds into such a scheme. Also, there are issues around commutation, which is the giving up of your main teachers’ annual pension in return for an immediate lump sum.
With these threats to your money in mind, we thought we would guide you through the critical issues when receiving advice on your pension.
Scammers are clever
The first thing to realise is that these scammers can be articulate. They will be financially knowledgeable, and they may even have a website that looks reliable with testimonials. This credible appearance will make it difficult for you to distinguish them from reputable financial services. The schemes they offer you for your AVC or your lump sum will seem valid and probable. Yet, if these are scammers, it is likely that this will be a high-risk investment, or they may steal your money outright.
Avoid immediate action
There are lots of signs that you will give you pause to worry. The first hint that there may be an issue is if the call comes entirely out of nowhere. In other words, if you have not sought advice yourself or filled in a contact form, then you should treat it as surprising and a little odd that they have approached you.
There are two other critical features of scam schemes. The returns they offer you will seem unrealistically high, and they will use phrases like “guaranteed return”. Even the money invested in your AVC is open to fluctuations in the market and the return offered cannot be 100% guaranteed. This guarantee is not a promise a valid scheme would suggest. The last key indicator of a potential scam is that they will put pressure on you to act quickly.
The general rule is if something sounds too good to be true and you need to act by tomorrow, then it should probably not be done at all.
Seek help from a financial advisor
The first step is to reject unexpected offers. The Pensions Regulator report that 95% of unforeseen approaches are scams. The best way to be sure is to seek professional advice and if they tell you that there is no time, revert to the standard position of rejecting the offer. Any valid scheme will be happy for you to take your time and seek the advice that you need.
Here is something we consider to be most important. You should seek impartial information and advice. We would say that, but it is true. Teacher Financial Planning would be more than happy to talk through any scheme with you. We can offer you objective advice that could prevent you from losing money needed for retirement.
If you believe you have been scammed at some point contact the FCA or the police.
The content in this article was correct on 4th January 2019. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pension schemes and may be able to advise of the validity of proposals. Please use the contact form below to arrange an informal chat with an adviser and see how we can help you.