Scammers are exploiting anxiety over upcoming inheritance tax changes to trick people into moving their pension savings into fabricated overseas schemes, with the UK’s largest pension provider warning that such fraud will escalate sharply before the April 2027 deadline. The average pension scam costs victims around £47,000, according to industry data, while losses from pension fraud totalled £17.5 million in 2024 alone.
How the scams work
Criminals typically make first contact through unsolicited emails, phone calls or messages that appear out of the blue. They may offer a free pension review or promise access to a high-return investment, often based overseas, that will allow savers to “avoid” the inheritance tax net. Common phrases used by fraudsters include “pension liberation”, “loan”, “loophole”, “savings advance”, “one-off investment” and “cashback”, according to The Pensions Regulator.
Under pressure, victims are told the offer is time-limited and that they must act immediately. If a saver agrees to transfer their pension, the scammers then coach them on how to answer the questions their existing provider will ask about the reason for the move. “The provider asks those questions to try to protect the saver, but the scammer is then coaching them on how to get through those,” said Donna Walsh from Standard Life. “Our teams are trained to identify that.”
The emotional manipulation is deliberate. “With these changes, people become uncertain and a little bit confused around what they can do, what will and will not happen,” Walsh added. “And that’s exactly the type of conditions that scammers are set to exploit.” The fabricated schemes often involve unregulated investments such as overseas property, renewable energy bonds, forestry, parking, storage units, art, or cryptocurrency – all difficult to verify. Scammers may also create convincing websites, testimonials and even use AI or deepfake technology to appear legitimate.
Cold calling about pensions is illegal in the UK, so any unsolicited approach should be treated with immediate suspicion.
What the inheritance tax changes mean
From 6 April 2027, most unused funds in a defined contribution pension – which covers the majority of workplace pensions and all private pensions – will be included in the deceased person’s estate for inheritance tax purposes. Currently, such funds generally fall outside the estate, allowing pension wealth to be passed on without IHT. Under the new rules, if the overall estate exceeds the available nil-rate bands, the pension may be subject to the standard 40% inheritance tax rate.
The basic inheritance tax threshold stands at £325,000 (the nil-rate band). This can rise to £500,000 if a home is left to direct descendants, known as the residence nil-rate band. Both thresholds are frozen until at least April 2028. Married couples and civil partners can transfer any unused portion of the nil-rate band to the surviving partner, potentially allowing a combined threshold of up to £1 million. The change is expected to bring around 10,500 estates into the IHT net for the first time, while an estimated 38,500 estates will pay more tax.
There is also a risk of double taxation: for beneficiaries of pensions where the deceased died after age 75, the funds could be hit by inheritance tax at 40% and then income tax when the beneficiary withdraws the money. While not everyone will be affected – many pension pots are smaller than the thresholds – the complexity of the rules creates fertile ground for fraudsters. “The forthcoming change has caused you some anxiety so this opportunity sounds promising. But the new scheme does not exist,” Standard Life warned in its analysis.
How to protect yourself
Experts advise never making a rash decision about pension transfers. “Those with larger pots may be thinking about how best to pass on wealth, particularly where pensions could face inheritance tax and then income tax for beneficiaries,” said Mike Ambery of Standard Life. “For some, that might involve longer‑term planning or decisions about gifting, but there’s rarely a one‑size‑fits‑all answer. What’s important is not to be rushed into action – especially if someone is pushing a ‘quick fix’, or playing on fear.”
The Financial Conduct Authority provides an online tool – the Financial Services Register – to check whether a company or adviser is authorised. If the firm is not on the register, you may have no access to compensation schemes such as the Financial Ombudsman Service or the Financial Services Compensation Scheme. The government-backed MoneyHelper service offers free, impartial guidance and can help you find a regulated financial adviser. For those over 50 with a defined contribution pension, Pension Wise provides free appointments to discuss retirement options.
If you have already been targeted, beware of “recovery room” scams in which fraudsters approach victims offering to recover lost money for a fee. Any suspicious activity should be reported to Report Fraud (formerly Action Fraud), the Financial Conduct Authority, or The Pensions Regulator.
