How to spot a pension or investment scam
Some £580 million was stolen through fraud in the first six months of 2023 and £1.2 billion in 2022, according to figures from UK Finance, and many criminals specifically target the vast sums of money held in pensions and investments.
There were almost 1,600 pension scams in England and Wales between 2020 and 2022, according to the National Fraud Intelligence Bureau, with those targeted losing an average of £16,500.
Meanwhile, the Financial Conduct Authority (FCA), the financial services regulator, revealed in early 2023 that the number of calls from investors about potential investment scams had tripled in just five years.
But these figures may only scratch the surface; the FCA estimates that fewer than one in five pension scams is reported. Victims often feel too ashamed or embarrassed to report the crime. Many are people with knowledge and experience of investments and pensions, who might seem too clued up to fall for a scam. And it’s not just about money. There can be serious psychological and emotional consequences to falling victim to fraud, particularly when someone has been manipulated and their trust betrayed.
How they do it
Fraudsters are increasingly sophisticated, often using emerging technologies to exploit vulnerabilities. Here are some of the main tactics being used:
‘Authorised push payments’: Here fraudsters impersonate well known organisations (such as the FCA, HM Revenue & Customs and high street banks) in order to trick victims into making payments themselves. If this doesn’t work, any personal details handed over can still be used to impersonate the victim and access their accounts that way
Pension ‘liberation’ or ‘loophole’ scams: Some scammers claim to offer pension access before age 55, the earliest point at which most people can legally release money from their pot. The victim is asked to transfer their pension into a separate scheme, with the company loaning them back a sum from that fund. But they will also take a huge fee, put the cash in high-risk investments and potentially leave victims with a hefty tax bill
Pension review scams: Sometimes targets are offered a ‘free’ pension review by a (typically unauthorised) company that wants to access the pension cash and invest it in unusual and high-risk assets. Victims are promised very high or even guaranteed returns, which invariably don’t materialise
Fake investments: Scams are designed to look like genuine investment opportunities, which often look very convincing, with professional literature, websites and social media profiles
Red flags
As scams evolve, they become ever more sophisticated, but they often have certain features in common that you can look out for. For example, if it sounds too good to be true, it almost certainly is. If someone claims to be able to deliver investment returns of 20% a year, there’s likely a very big catch involved. Either it’s a high-risk investment with a strong chance of losing your money, or it’s entirely fake. It’s also helpful to know that pension companies cannot legally contact you out of the blue and genuine businesses will never rush you into making a decision or make time-limited offers.
Talk to your adviser
Thankfully, as you have an adviser, you’ve got an added layer of protection, so make sure you make the most of that relationship. By discussing every pension or investment decision with your adviser first, you can be confident that you won’t get ripped off. That could be the single biggest step you can take to protect yourself against the financial, emotional and mental costs of falling victim to a scam. But there are also plenty of steps you can take yourself to say safe:
Check the FCA warning list: The regulator’s ScamSmart website includes articles on different types of scams, information on what to do if you encounter or fall victim to a scam and an up-to-date list of the organisations and scams to avoid. Its register also allows you to check that a particular firm is authorised by the FCA
End cold-calls: Reputable providers don’t phone people out-of-the-blue, or pressure customers into making decisions. If you don’t know who’s calling and/or they’re hard-selling, put the phone down
Regularly check your bank account and credit card statements: Watch out for rogue transactions and don’t use the same password for more than one online account
Don’t let anyone access your computer or devices remotely. Some scams ask victims to click on a link or download an app, which then gives criminals full access to your device
24 July 2024