The regulator identified as series of ‘red flags’ that consumers should consider before making decisions about transferring their pension.
“The red flags are not exhaustive and the existence of one or more of them does not necessarily mean that the arrangement is a pension scam. However, the red flags do indicate a need for scrutiny and caution,” the regulator said.
The IoMFSA consumer awareness initiative follows a similar move by the Jersey Financial Services Commission on Monday.
Unregulated financial advice
Pension scammers may recommend a particular financial adviser, pose as a financial adviser or claim to work with a financial adviser.
“[IoMFSA] strongly recommends that you only take financial advice from financial advisers that you have independently checked are licensed or authorised to give financial advice.”
For financial advisers based on the Isle of Man, consumers should check if they are licensed by contacting IoMFSA.
For financial advisers based in the United Kingdom, consumers should confirm that they are registered by the UK Financial Conduct Authority.
Unregulated investments and insufficient diversification
Well-known scams include unregulated investment in a hotel, vineyard or other overseas investment opportunities. The investments may be worthless or sometimes do not even exist.
Even if the arrangement is not a scam, unusual investments such as overseas property, forestry, care homes or biofuels tend to be unregulated and high risk.
“The risk to your pension is greater if you do not have a diversified portfolio of investments within your pension. In particular, where your pension is invested in one place or venture and the investment performs badly, you could lose all of your money,” IoMFSA said.
Consumers considering transferring their pension or investing some of their pension in unregulated investments should obtain advice from a regulated financial adviser unconnected to the investment company.
“If you speak to the adviser who suggested the transfer or investment, or an adviser who is indicated or referred to you by either the person who initially contacted you or the firm that you are considering investing with, you are unlikely to receive impartial advice.
“You should also limit your risk by investing your pension in a diversified range of investments. Don’t put all your eggs in one basket.”
Cold calls, unsolicited communications, and free pensions reviews
Pension scams are typically initiated by cold calling or sending unsolicited texts or emails.
“To appear credible, scammers may claim that they are contacting you from government-backed or other official bodies,” IoMFSA said. “However, these organisations would not make unsolicited phone calls or send unsolicited texts to offer a pension review.”
The regulator warned consumers to be wary of unsolicited communications and online adverts offering a ‘free pension review’.
“Professional pension advice is rarely free and should be obtained from appropriately regulated financial advisers.”
The UK government outlined plans to ban cold calling in November, where businesses would be forbidden from contacting consumers with whom they had no existing relationship.
