Our expert has some tips for limiting the risks posed by pensions fraud
Thursday 29 Apr 2021 Author: Tom Selby

How can I really know if an investment is legitimate or not? What checks can someone do to reduce the risk of being taken in by a scammer?


Tom Selby, AJ Bell Senior Analyst says:

Financial scams are depressingly common and often target people’s hard-earned pensions. This has particularly been the case since 2015, when government reforms gave savers total freedom and choice over what they do with their retirement pot from age 55.

Official estimates from the Pension Scams Industry Group suggest £10 billion has been stolen from pensions in the past six years.

Scam activity has increased during the coronavirus pandemic, with fraudsters aiming to take advantage of increased vulnerability among UK savers.

And while efforts are being made by the authorities to protect people from financial crime – including banning pensions cold-calling and giving providers more power to reject suspicious transfers – the onus remains on individual investors to protect themselves.

Here are five things you can do:

1. Be suspicious of unsolicited calls, texts or emails about
your pension:
Scams often start with a call, text or email out of the blue offering ‘help with’ or perhaps a ‘review of’ your pension arrangements. To be safe, if someone you don’t know contacts you about your pension – or indeed your finances in general – do not engage with them. If you believe someone is trying to scam you, report them to Action Fraud to help protect other investors.

2. Be extremely wary of anyone promising large, guaranteed returns: Another tell-tale sign of a scam is the promise of huge, guaranteed investment returns, often over relatively short spaces of time. These investment ‘offers’ take many weird and wonderful forms, while the rise in popularity of cryptocurrencies has also been an obvious target for financial fraudsters.

3. Only deal with regulated companies and individuals: At the heart of scams are often unregulated ‘introducers’ peddling unregulated investments. While there is nothing wrong with investing in unregulated assets, where fraud occurs these often turn out be vastly overhyped or entirely fictitious. Even where an unregulated investment is real, if you suffer losses through misselling you will not qualify for FSCS protection worth up to £85,000.

4. Do your due diligence: Scammers’ tactics have become more sophisticated in recent years, with ‘clone’ scams – where fraudsters impersonate a real firm to con you out of your cash – increasingly common. You can cross-check the phone number or email address provided by someone who contacts you with the FCA register to make sure they are who they say they are.

5. Don’t be rushed and if in doubt, speak to a regulated financial adviser: High-pressure sales tactics – such as telling someone they need to invest by a set deadline – are a classic scam tactic and should immediately set off alarm bells. Do not under any circumstances be rushed into a decision you aren’t completely happy with. If you want help with your options or are unsure what to do, consider speaking to a regulated financial adviser or visit Government-backed retirement guidance service www.pensionwise.gov.uk.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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