Some common pension and investment scams and how to avoid them

Category: News & United Kingdom

Pension and investment scams are becoming more prevalent, and the anecdotal evidence we hear about bears this out, with several of our clients reporting that they have been targeted.

A recent Money Marketing report revealed that a shocking £2.6 billion has been stolen in investment fraud since 2020, with FTAdviser confirming that £612 million has been lost to fraudsters in the last year alone.

And it’s not just average individuals, or unsuspecting older people, who may not be as tech aware as younger generations, who being targeted. Indeed, Finances Online revealed that world-famous stars such as Robert de Niro and Elton John have lost millions of dollars to fraudsters.

Scammers use a range of methods to try to steal your money

A Forbes report highlighted some of the most common scams identified so far in 2024. These include:

  • Impersonation scams, where fraudsters will pose as someone you would normally trust, such as your bank, to get you to part with your money or your personal details.
  • Identity theft, when fraudsters use your personal details to steal money from you, has increased with Forbes reporting that a third of UK consumers had fallen prey to identify fraud in 2023.
  • Authorised push-payment scams, where you are deceived by a fraudster who persuades you to pay for non-existent good or services.

Pension scams target your hard-earned retirement fund

Fraudsters are only too well aware that your pension pot is likely to be one of your most valuable assets. This is especially true as you get closer to retirement and have built a substantial fund to provide you with a comfortable lifestyle once you stop working.

Because of this, you should always be on your guard for unsolicited offers to invest part, or all, of your fund for higher or supposedly “guaranteed” returns.

Often the approach you receive will be styled as a “pension review” with the scammer asking for full details of your fund, and then suggesting alternative investment opportunities.

A variation of this will involve you being offered the opportunity to access some of your pension fund before the minimum pension age of 55.

While such schemes, known as “pension liberation”, are legal, they will often involve you paying high fees, and receiving an unwelcome tax charge of 55% from HMRC.

There are a variety of investment scams

Investment fraudsters will use a variety of means to highlight their particular offer to you. These might arrive via phone calls, emails, or online advertising.

Typically, you will be directed to a well-designed website that promotes an investment company and their products. These sites will often be completely bogus. Indeed, a Which? report confirmed more than 2,000 such websites were reported in 2023.

The investment opportunities you are offered will often be described as “can’t miss” and you’ll read reports of previous substantial returns such investments have delivered to other individuals.

The investments will often be in high-risk offshore funds, with the attraction being that they may help you avoid UK tax.

Sometimes the investment itself will actually be legitimate, but the high charges and upfront and ongoing fees you end up paying will dwarf any investment returns you could expect.

6 effective ways to protect yourself from pension and investment scams

Virtually anyone can be targeted by financial scammers, so it’s important to always be on your guard. So, here are some simple and straightforward ways you can protect yourself, and other members of your family.

1. Know the methods scammers use

Simply reading this article will have given you a level of protection from financial scammers as you will have increased your knowledge of how they work and some of the tricks they use to target your wealth.

It’s worth being on the lookout for articles of this kind and making a point of reading them. Scamming methods are constantly evolving and it’s important to remain fully aware of how you may be targeted.

2. Pause and think if you are made a financial offer

One common tactic fraudsters will deploy is to rush you into making a mistake and parting with your money, or signing up for something you don’t want or need.

This will often involve a “short-term” investment opportunity, that you need to act quickly to take advantage of.

The idea is to prevent you thinking in too much detail about what you’re being sold, so the best way to counter this is to always slow down, stop and think. Don’t let yourself be rushed into making any decisions you are liable to regret.

3. Do your own research

If you are buying a new car you will always conduct your own due diligence. You’ll test drive the model you’re looking at, read reviews, and maybe ask other people you know with the same car about their experiences.

So why wouldn’t you do the same with a financial transaction that could involve a similar, or even greater, sum of money?

Always check out the website of any investment company you are approached by. Try and find third-party reviews and carry out a Google search on the companies and names involved.

4. Don’t trust phone or email offers

In reality, the best way to avoid being scammed is not to accept any offer from an individual or a company who makes unsolicited contact with you.

Financial fraudsters will be trying to attract you to part with your money through a variety of means such as phone calls, emails, and online advertising.

If you make a point of not entering into phone conversations or responding to such offers, you’ll go a long way to ensuring you’ll never fall victim to a scam.

5. Always remember the golden rule

As you have read, scammers will try to tempt you with special offers or extravagant claims of “guaranteed” investment returns.

In reality, if something you are being offered sounds too good to be true, then it nearly always is.

6. Get expert advice

If you’re considering taking advantage of a pension offer or thinking about an investment outside of your financial plan you should always speak to your financial planner first.

They are always available to discuss your options and help you make sound decisions that are appropriate for you now, and in the future.

Get in touch

If you have been targeted by a scammer or are concerned about any approaches you may have had, please get in touch with us.

Please note

The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC legislation, which is subject to change.