A Self-Invested Personal Pension (SIPP) is a personal pension scheme that gives people flexibility in making investment decisions, helping them build a pot of money over a period of time for their pension.
You can invest in a Self-Invested Personal Pension either individually or with the help of a financial advisor. However, as with any financial product, there are risks and scams targeting those who don’t have a lot of investment experience. As such, it’s worth being diligent and looking out for any red flags to protect your investment prospects and future pension. The consequences of being miss-sold a Self-Invested Personal Pension (SIPP) could mean losing a big chunk of your hard-earned savings.
1. Cold Calls
Pensions should only be dealt with by qualified and regulated financial advisors who would only offer their expert advice when you seek them out. Some Self Invested Personal Pension scammers will cold call you out of the blue to offer their services. If they offer a free pension review or try to entice you with promises of returns that seem too good to be true, you should be very wary of this.
2. High-Pressure Sales Tactics
It goes without saying that you should never hand over your financial details to a complete stranger. However, some scams may seem real enough to fool even financially savvy people. As a result, high-pressure tactics may lead you to reveal sensitive information inadvertently. Examples include time-limited offers, passing you over to an ‘expert’, or rushing you to send documents. If you are pressured to make important decisions such as investing in a SIPP quickly without fully understanding what you are putting your money into, this is a red flag.
3. Obscure Investments with High Returns
Criminals will prey on our anxiousness to gain security for our future by offering investment opportunities that promise higher returns. Scammers try to pull the wool over people’s eyes by offering obscure or high-risk investments with complicated investment structures that are hard to understand. Other red flags include recommending investments that are overseas or ‘fixed term’ pensions which may take you years to realise are not legitimate. Many of these investment opportunities will either be unregulated or have no consumer protections in place to safeguard your money.
4. Lack of Detailed Information
Another red flag to look out for when it comes to SIPPs is the lack of any detailed information about the scheme, particularly when you ask for it. A good advisor should explain both the benefits and risks associated with any SIPP scheme you’re looking into. You should also be able to find out where exactly your money will be invested to
see if it matches your goals. This way, you can then make an informed decision about which SIPP scheme to join.
5. Persuasive Language
Scammers may use language that is designed to make you feel like you’re getting the deal of the century. Anyone promising pension liberation, loopholes, or ‘savings advance’ should raise red flags. The same applies to claims of substantial profits, guarantees of better returns, or promises of helping to release your pension early without any mention of the potential penalties.
The Pensions Regulator cites many of these examples as red flags which are grounds for a pension transfer being refused. Investors looking to open Self Invested Personal Pension plans should take note of the regulator’s advice and consult a registered financial advisor.
You can check the Financial Conduct Authority register to check if an individual or company is regulated.