How to spot pension and investment scams and protect yourself

By HarperLees

There’s an old saying that “a fool and his money are easily parted”. Sadly, as criminals use ever-more sophisticated methods of deception, it’s never been more likely that even wise and experienced savers can fall victim to a pension or investment scam.

Indeed, according to data from the Financial Conduct Authority (FCA), over £2 million was lost to pension scams between January 2021 and May 2021 alone. Similarly, a report by Nationwide Building Society revealed that investment scams accounted for 36% of all scam cases in 2022, with an average claim of £5,000.

So, read on to find out exactly what pension and investment scams are, how to spot them and what you can do to protect yourself.

Pension and investment scams are aimed at getting quick access to your money

Fraudsters are finding inventive ways of taking money from unsuspecting victims, with pension and investment scams being two of the most frequently used methods.

1. Pension scams

Your pension is likely to be one of the most significant financial assets you accrue in your lifetime. So, it’s perhaps no surprise that criminals use sophisticated methods to get their hands on your savings.

Scammers may try and contact you to offer you a “free pension review”. These reviews are designed to persuade you to move money from your pension pot into a high-risk scheme or an unusual investment, like overseas property, biofuels, care homes or businesses you may not be familiar with.

Scammers may also claim they can help you “unlock your pension”, also known as pension liberation. This means they would attempt to “liberate” your pension without penalty, by using tax loopholes. However, there is usually no way to access your pension early without paying significant penalties.

2. Investment scams

Fraudsters often attempt to scam unsuspecting victims through “Ponzi” schemes and clone investment firm scams.

“Ponzi” schemes

The most famous kind of investment scam is a “Ponzi scheme”, where money is collected from new investors to pay previous investors. Eventually, the money owed will end up being more than the money collected and the scheme collapses, leaving all investors out of pocket.

There are a few warning signs to look out for, including:

  • High returns with little or no risk
  • Difficulty receiving payments
  • Unregistered investments
  • Issues with paperwork
  • Overly consistent returns
  • Unlicensed sellers.

Clone firm investment scams

These scams will involve fraudsters using literature, phone numbers and websites that copy the details of authorised and legitimate companies. Scammers often target victims through fake advertisements on search engines or social media, with the ads linking to a replica of the genuine company’s website.

As many of these fraudsters take up this activity as a full-time job, they can often be incredibly convincing and are very clever in the ways in which they try and gain your trust. They may even use the names of legitimate employees from the relevant organisation or company.

How to spot scams

According to Professional Adviser, 1 in 4 savers are at risk of pension scams. In addition, the Financial Ombudsman Service reports that there were 570 investment scam complaints between 1 April 2022 and 30 June 2022 alone. So, if you want to protect yourself, here are five things to look out for.

  1. Unsolicited contact – be aware of any unsolicited approaches by text message, in person, by email or by phone.
  2. Threatening and pushy behaviour – you would be forced to make a quick decision, encouraged to transfer funds or financial information quickly and send documents by courier, or pressured and rushed.
  3. Offering “guaranteed” high returns – scammers attempting to gain access to your money will often offer you high investment returns and claim they are low risk. However, big guaranteed returns simply don’t exist.
  4. Avoiding verifying their authoritya scammer won’t allow you to call them back or will refuse to give any contact information aside from a PO box address or a mobile phone number.
  5. The company is not FCA-registered – if the FCA doesn’t recognise the company, it is most likely a scam.

What you can do to protect yourself

If you suspect you have been the target of a scammer, there are a few things you can do to protect yourself.

While it’s important to reject any unsolicited messages, emails, or calls, if you do speak to someone that you suspect is trying to defraud you, always take a phone number and call them back. Additionally, look up the details of the company they claim to be from and call that number. The company will very quickly tell you whether the initial call was from them or not.

Make sure that the person you’re dealing with is regulated by the FCA and listed as an authorised and approved firm on their register, so check whether the company is shown on this list. You could also check any offer against the information on the FCA’s ScamSmart website.

Also, carry out a thorough internet search on the company they claim to be from. Not only look at where the company is located and how easy it is to contact them but also check the firm’s FCA status.

Finally, seeking independent financial advice from a regulated and trusted financial planner can put your mind at ease. They will be able to help you understand whether the opportunity is legitimate, and whether it makes sense for your financial circumstances.

Here’s what to do if you think you’ve been scammed

If you’re concerned that you might have been scammed, it’s important to inform your bank. They will replace your cards if they have been compromised, increase security on your account, and provide useful information on how to spot scams and fraud. You can also register with Cifas and have your name added to the National Fraud Database.

Finally, you should report any scams or fraud to Action Fraud, the UK’s national reporting centre for internet crime and fraud. You can either submit a report on their website or call them on 0300 123 2040.

Get in touch

If you are worried about scams, or you’ve been offered an investment opportunity and you’re not sure whether it is genuine, speak to our financial planners. Please email or call 01277 350560.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.