How to avoid common pension and investment scams, and what to look out for

In recent weeks, fraudsters have been preying on the uncertainty caused by coronavirus. According to the UK’s ActionFraud, a total of £5.1m worth of losses to fraud have been reported across the country since February.

ActionFraud have seen more than 11,000 coronavirus-themed scams since the start of the lockdown, with investment and pension-related scams among the most common.

The Pensions Regulator chief executive Charles Counsell says: “These figures once again show the true devastation of scams; anyone can be a victim and Covid-19 has created the sort of environment fraudsters thrive in.”

To help you stay safe, here are some of the common signs of a scam, and what you can do to avoid becoming a victim of fraud.

6 warning signs of pension and investment scams

One of the consequences of the coronavirus pandemic has been volatility in stock markets across the world. Millions of investors – including those with pensions – may have seen the value of their funds fall, leading to concern, worry and vulnerability to scams.

Royal London pensions specialist Helen Morrissey says: “Scammers are known to work at lightning speed and evolve their methods to exploit people’s fears. They may well take advantage of people’s concerns about a drop in their pension value or a potential loss of income to try and separate people from their pensions.”

So, what should you look out for?

1. 1. 1. Contact out of the blue – Even though the UK introduced a ban on pensions cold-calling, there remain many reports of scammers contacting people by telephone offering a ‘pension review’ or similar. Contact can also come from online sources e.g. email or social media, post, word of mouth or even in person at a seminar or exhibition. If someone gets in touch with you from a company you’ve never dealt with before, be wary.

1. 1. 2. Defined Benefit/Final Salary transfers – This more sophisticated scam includes two parties. One IFA will want another to provide pension transfer advice, while the other will invest your final salary pension fund (usually offshore). Both will claim to be vague about liability, so it’s another instance where you shouldn’t commit until you are completely sure it is legitimate

1. 1. 3. Time pressure – A genuine financial planner will never rush you into a decision or insist that you act before a certain date. So, if someone is offering you a discount or a bonus if you commit by a certain date, it’s likely to be a scam.

1. 1. 4. Genuine looking websites and branding – Scammers will often use websites and literature that look plausible and real. They will claim to be regulated and ‘look’ like a genuine company. This often makes it easy to be deceived.

1. 1. 5. Fake reviews – Scammers often share fake reviews and claim that there has been unprecedented demand for their deal. They use a ‘miss it, miss out’ approach.

1. 1. 6. High returns – Anyone promising tempting returns or claiming they can generate spectacular returns (for example, better rates than other providers) are generally scams. If it sounds too good to be true, it probably is.

1. 1. 7. Building a relationship with you – Fraudsters are clever and may even have been able to get hold of some of your personal details so they can sound like they ‘know’ you. Don’t be fooled by someone who knows a little about you or the area where you live, and don’t be seduced by flattery.

What you can do to avoid being scammed

In recent months, fraudsters have exploited the uncertainty caused by coronavirus to prey on the worry and anxiety of investors.

Financial Conduct Authority (FCA) executive director of enforcement and market oversight, Mark Steward, has three simple tips to avoid falling foul of a pension or investment scam:

1. 1. 1. Reject all unexpected and unsolicited offers
      2. Get to know the warning signs of scams (as highlighted above)
      3. Get tips and advice on the FCA’s dedicatedScamSmart website.

Other ways that you can stay safe include:

1. 1. • Beware of phone calls, emails and text messages out of the blue. Don’t respond to unexpected messages – even if they look real, get in touch with the organisation yourself to establish they are genuine
      • If you receive an email that you’re not sure about, expand the pane at the top of the message to see exactly who it has come from. Scams often come from email addresses that don’t look quite right – for example, there may be random numbers in the email address, or something is not spelled correctly
      • Never provide any PIN, password or account details in response to a message and don’t supply personal or financial details unless it is a provider you trust. If someone calls you, always call them back to make sure it is a genuine request
      • Don’t ever act quickly or make a rash decision. Genuine financial services providers will not pressure you into action and will give you time to consider any offer.
      • Always check whether a financial services firm you are considering transacting with is FCA authorised by consulting the FCA Register for all authorised companies.

Get in touch

One of our roles as financial planners is to make sure that your pensions and investments are managed carefully, and that you don’t fall foul of a scam.

If you are considering an investment option or thinking of making decisions regarding your investments or pensions, you should chat it through with your financial planner or adviser. A qualified professional can look over any proposed investment and provide you with impartial advice.

Please get in touch if you would benefit from advice, or call (01372) 724 249.