Investment scams can originate online, over the phone or in the post, and usually involve offers of worthless, overpriced or non-existent shares in unregulated products such as wine, diamonds or land.
The Financial Conduct Authority warns that over-55s are at greatest risk of investment fraud. These are high-loss scams with the average loss being over £32,000, according to Action Fraud. Around three-quarters of victims of investment fraud are men with the average age of 65. Those with savings of more than £10,000 are the most likely to fall victim to scammers.
Pension liberation scams target older people by offering to convert pension benefits to cash benefits. Victims pay high fees and often face tax bills as a result of such schemes. These scams have become particularly relevant since the 2015 changes to pensions access made it possible for a proportion of pensions to be withdrawn in cash.
In 2017, 253 people told Action Fraud that they had fallen victim to a pension scam. Between them, they lost more than £23 million – an average of £91,000 each.
The Pensions Regulator has published a leaflet warning about the signs of pension scams and giving five top tips on how to protect yourself. You can download it here.
Scammers usually cold-call but contact can also come by email, post, word of mouth or even at a seminar or exhibition. Callers may pretend they aren’t cold-calling you by referring to a brochure or an email they sent you – that’s why it’s important you know how to spot the other warning signs.
They can use various different tactics at different stages of the process:
- The pre-caller will get in touch to obtain your personal details, by inviting you to complete a survey or offering to send you something in the post.
- The opener will strike up a relationship with you, appearing friendly and knowledgeable, and make you feel special.
- The loader will draw you in, offering you an investment opportunity that appears great.
- The closer will pressure you into parting with your money by warning that the offer won’t be available again and that time is running out.
- The recovery room: After you’ve lost your money, they’ll sell your details to a recovery firm, or pose as a separate firm, offering to help you get your money back for an upfront fee.
Spot the signs
Any of these signs should warn you that the offer could be scam:
Offers that promise:
- A free pension or investment review.
- Guaranteed returns.
- Low-tax or tax-free rates, including tax-free lump sums.
- Exotic sounding and/or overseas investment.
- Pressure to sign up quickly.
Fraudsters will often:
- Apply pressure to invest quickly – they might offer you a bonus or discount if you invest before a set date or say the opportunity is only available for a short period.
- Downplay the risks to your money – they might say you will own actual assets you can sell to make back any losses or use legal jargon to suggest the investment is very safe.
- Promise tempting returns that sound too good to be true, such as better interest rates than elsewhere.
- Say that they’re only making the offer available to you or even ask you to not tell anyone else about the opportunity.
DON’T BE A SCAM VICTIM
Remember the golden rule: IF SOMETHING SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS!
Reject all unsolicited contact about investments. If you’re contacted out of the blue about an investment opportunity, chances are it’s a high-risk investment or a scam.
If you get cold-called, the safest thing to do is to hang up. If you get unexpected offers by email or text, it’s best to simply ignore them.
Don’t be rushed into making a decision – especially if they are claiming it is a time-limited offer that won’t be around for much longer.
Check to see if the investment firm or adviser is authorised on the Financial Services Register.
Check the FCA Warning List tool to see if the investment opportunity on offer is a scam – this is a list of firms that the FCA knows is operating without permission or running scams.
The Financial Conduct Authority runs a campaign called ScamSmart which helps people to identify fraudulent investment or pension opportunities. There’s a handy quiz, as well as a range of leaflets, posters, videos, infographics and other resources.
Don’t let a friend talk you into an investment – check everything yourself. People have fallen for scams because they’d been recommended by a friend. Do your homework, even if you believe yourself or your friend to be financially savvy. False confidence can lead to getting stung and with a pension, it might be years before you discover you’ve been scammed.
Watch this quirky video produced by Action Fraud warning against investment scams.
What are the signs that someone you know might be a target for this type of scam?
Your suspicions should be raised if someone you know:
- Talks about exciting “business opportunities”.
- Spends a lot of time sending and receiving emails.
- Makes frequent online payments.