How to avoid scams

The Financial Conduct Authority (FCA) has recently launched a new TV advert warning about the dangers of Pension Scams.

The campaign is backed up by radio and digital ads. Data from the regulator shows that the average amount lost in a Pension Scam is a massive £91,000!

This new campaign is undoubtedly a step in the right direction and will go a long way to help to educate the public about the dangers of scams and unregulated investments. Our advice is always to apply the old maxim “If it sounds too good to be true then it probably is”.

There are a number of signs to look out for when you are considering a pension transfer. So here are our 5 Top Tips to spot a Pension scam.

Don’t deal with anyone who contacts you about your pension by e mail, text or phone.

The first tip and one of the most important is not to deal with anybody who contacts you out of the blue, whether it’s by e mail, letter, text, or most importantly telephone. Regulated Pension Transfer specialist firms DO NOT use cold calling and direct marketing techniques to approach clients.

Don’t deal with anyone who isn’t on the FCA register.

Always check the FCA Register to make sure that both the Firm and the Financial Adviser you are talking to is on the register and regulated. There is simply NO good reason, or excuse, for them not to be on the FCA Register, If they are not on the register they are un-regulated, and IT IS A SCAM.

If it sounds too good to be true – it usually is!

Another tell-tale sign is the offer of high returns for little risk. This is often combined with the offer of unusual investments and the lure of getting involved early before everyone else finds out about it. In the past this tactic was used to sell SIPP investments in overseas hotel and apartments, environmentally friendly green investments in rain forests, and investments in car parking spaces and storage units, for example. Hundreds of these schemes have since gone bust with investors losing everything. This high return offer is often successful because it plays on people’s simple desire for more money! Once again, the most important maxim is to think “If it sounds too good to be true then it probably is”. What are the chances that you, as an ordinary working person are likely to have been specially selected to receive a once in a lifetime opportunity!! Sadly, we see and hear about these schemes all too often, with tales of a “friend of friend” who is making thousands from cryptocurrencies, or thousands from their investment syndicate in the pub!

If it needs to be done quickly ask yourself why?

You should be very wary of the time sensitive offer. Where you must invest NOW or you will lose the opportunity. That’s pretty much always rubbish! Any properly regulated IFA would never put any time pressure on you to make an investment decision.

If you don’t understand it – don’t do it!

Over complicated arrangements should also be treated with suspicion. If there appears to be several parties involved in the transaction (especially foreign parties), be wary, and also if you simply can’t understand what’s happening to your money, or where it’s being invested, then you SHOULD NOT go ahead.

The FCA also warn about Free Pension Reviews and so do we, where that Free review is being offered to you out of the blue.

However, we do offer clients a Free Pension Review, but that is only to clients who contact us direct. Our Free Review is exactly that and we will always explain exactly what the Free Review entails and why we believe it is of benefit.

At the moment it seems that all we are getting from the Financial Conduct Authority (FCA) are scam warnings. On the one hand it’s certainly a good thing that the regulator is being proactive in bringing warnings to the attention of both advisors and the public, but on the other hand the number of warnings is a real concern. It feels like consumers are under constant attack, especially online.

The latest warnings are about “impersonation” which is where criminals pretend to be another legitimate company online to attract enquiries from consumers where they can then acquire personal information and even bank details. We have been warned about this before back in December, but investigation by advice firm Quilter has now shown that the number of “impersonations” has risen to an all-time high, with  543 reports to the FCA in 2020, up from 300 in 2019 an increase of 33%. But when you look back over the past decade, the number has increased from just 62 in 2010 – an increase of over 700%.

Please be careful.

Scam predictor tool

One thing that could help is a new online scam predictor toll recently launched by Not-for-Profit organisation Help and Advice.

The tool asks a series of questions and based on your answers it produces a percentage risk score and a flag warning Green/Amber/Red. This is not a sales tool. You are not asked to input any personal information just answer a series of straightforward questions about how you’ve been contacted and what your “adviser” has said to you. Questions about whether you have been offered fantastic returns, or special time limited offers, or the ability to access your pension before you reach 55 – all classic warning signs.

We have tried it out and it seems quite useful if you have concerns about who is offering you Pension Help.

You can click on the link here.

But why do you need to be careful?

The FCA estimates that there are 24 million potentially “vulnerable” individuals in the UK. Of course, these are the people who are most at risk from fraud.

£657 million has been lost to fraud over the 12-month period from September 2019 to September 2020 and 17,000 reports were made to Action Fraud over the same period. It could be worse with Pension Wise estimating that over £1 billion may have been stolen from pensions by fraudsters.

It’s clear that financial advisors have a key role to play in combatting fraud, by being diligent on behalf of their clients. But this also extends to client’s immediate family and friends who can also benefit from the communication of best and safe practices.