- Savvy Brits blocked £2 million of scams in 2022 by spotting warning signs and reporting them to the regulator, new research reveals
- Calls to the FCA’s consumer helpline have increased by 193% in the last five years – likely a result of rising awareness of scams and increased scam activity
- Investors are becoming increasingly streetwise to common fraud tactics:
- Two-in-five (39%) say their investigative or research skills are helping them to spot scams
- Noticing mistakes in material (34%) and receiving requests for personal information (34%) were the most commonly cited tell-tale signs of an investment scam
- Other warning signs that made investors suspicious included being contacted out of the blue (33%) and being pressured to invest before an ‘offer’ ends (26%)
- A third of people who avoided a scam were first approached via email, while a quarter received a personal phone call
- AJ Bell’s top tips for savers and investors to avoid becoming scam victims
Tom Selby, head of retirement policy at AJ Bell, comments:
“It has never been more important for savers and investors of all ages to be on their guard to the risk of scams. The cost-of-living crisis is straining the budgets of millions of households, increasing financial vulnerability and providing an ‘opportunity’ for fraudsters to tempt people to part with their hard-earned savings.
“The good news is that Brits are getting increasingly savvy when it comes to avoiding scams, spotting the tell-tale signs of dodgy investment ‘offers’ and steering clear of anything that doesn’t pass the smell test.
“While anyone can be the victim of financial fraud, pension savers over the age of 55 who can access their retirement pot flexibly are an obvious target. In many cases, someone’s pension will be the most valuable financial asset they have, with the possible exception of their house.
“If someone contacts you out of nowhere and tries to convince you to withdraw your pension and invest it elsewhere, you should be extremely wary. You’ll not only potentially pay a huge unnecessary tax bill, but you could also be putting your retirement at risk.
“In the worst-case scenario, the investment could be fraudulent and you might end up losing everything. You wouldn’t gamble your house at the casino, so why would you even contemplate taking risks like this with your retirement?”
Here are some steps you can take to help avoid being scammed:
1. If someone contacts you out of the blue to talk about your pension, hang up!
Most people at some point will have received a phone call from someone they don’t know claiming to offer an incredible investment opportunity for their savings or a ‘pension review’ service. If this happens, hang up immediately. Equally, don’t respond to text messages, emails or social media contact from someone you don’t know claiming to hold the key to retirement nirvana. In all likelihood this will be a scammer phishing for victims, so, whatever you do, don’t take the bait.
2. Don’t deal with unregulated ‘advisers’
While telephone, text, email and social media remain the primary weapons of choice for the modern con artist, some continue to knock on doors; usually targeting older people they think are more likely to be vulnerable. Make sure you only deal with FCA-regulated advisers – this is particularly important as if you are sold an investment by an unregulated individual, you won’t have recourse to compensation.
3. Be wary of overseas or crypto investments promising sky-high returns
Scammers often promise double-digit returns through exotic investments in far-flung locations. Promoting cryptocurrency investment ‘opportunities’ has also become an increasingly popular route for fraudsters. If you’re told you can get 10%+ annual returns from a teak plantation in South American or a hotel room in Spain, tread carefully and do your due diligence. Often fraudsters will advertise investments in an asset that doesn’t exist or hasn’t yet been built, so don’t hand over your cash unless you’re 100% confident you’re being sold a genuine, bona fide investment.
4. Watch out for schemes offering ‘guaranteed’ returns
Nothing is guaranteed when it comes to investments. If a company you’ve never heard of says it can deliver GUARANTEED returns of any amount, don’t touch them with a barge pole.
5. Don’t rush to make a decision
Don’t be forced into doing something you aren’t comfortable with and might regret by a pushy salesman or saleswoman desperate to boost their commission. Your pension might just be the most valuable asset you ever own, so invest it wisely. And if you are at all unsure, check the FCA’s ScamSmart website (ScamSmart - Avoid investment and pension scams | FCA) or speak to a regulated financial adviser before making any decision.
The most commonly used tactics of pension scammers to be aware of include*:
- the offer of a free pension review
- promises of higher returns, where fraudsters say they will guarantee they can get you better returns on your pension savings
- help to release cash from your pension even though you’re under 55. An offer to release funds before age 55 is highly likely to be a scam, and will result in you being hit with an eye-watering tax penalty from HMRC
- high-pressure sales tactics, where the scammers may try to pressure you with ‘time-limited offers’ or even send a courier to your door to wait while you sign documents
- unusual investments – these tend to be unregulated and high risk, and may be difficult to sell if you need access to your money
- complicated structures where it isn’t clear where your money will end up
- arrangements where there are several parties involved (some of which may be based overseas) all taking a fee, which means the total amount deducted from your pension is significant
- long-term pension investments – which mean it could be several years before you realise something is wrong
*Source: FCA
