How to stay safe from pension and investment scams

Category: News&Pensions

If you’re struggling financially, it might be tempting to snap up that “guaranteed money-making” investment or to exploit that new pension loophole that everyone is talking about.

Research published by the Guardian has revealed that almost 13 million people in the UK are currently struggling to pay their bills. These serious money worries could make people more vulnerable to the quick fix that scammers promise.

According to figures published by Money Marketing, pension scams cost individuals more than ÂŁ26.4 million between 2020 and 2022.

Read on to find out how to spot the most common pension and investment scams and find out how to keep yourself safe.

Common pensions and investment scams to look out for

Knowing what to look out for is one of the best ways to protect yourself from falling victim to a scam.

Pension and investment scams have become increasingly sophisticated in recent years. Scammers often create credible looking websites complete with testimonials and resources that make it almost impossible to distinguish them from a genuine provider.

Even the most financially savvy person could fall prey to a fraudulent scheme.

Investment scams usually work by enticing people with a legitimate looking business and then convincing them to hand over money for amazing, too-good-to-be-true investment opportunities.

Often, the investments don’t exist, and the “amazing opportunity” represents little more than a Ponzi scheme, with investments from newly scammed individuals being used to pay off previous victims. Typically, the “investors” or victims of the scam never see the incredible returns promised and instead walk away with nothing.

Pension scams usually entail fraudsters persuading you to cash out your pension early so that they can invest it for you at a higher rate of return. They may try to entice more money out of you by claiming that they can use a loophole to help you avoid paying tax, often for a fee.

Some pension scammers will approach a victim a second time, offering to help you recover the funds lost in the first scam!

How to keep yourself safe from financial fraud

There are several red flags that The Pensions Regulator (TPR) recommends you look out for if you want to avoid becoming a victim of a pension or investment scam.

  • Guarantees of an incredible and quick return on your investment
  • An offer to help you gain access to your pension before the age of 55 (with no tax liability)
  • Hard sell tactics, such as telling you that this offer is only on the table for 24 hours
  • Obscure or overseas investments that are hard to check up on
  • Complex jargon and terms and conditions.

If you feel uncertain about a new financial opportunity, play it safe by taking the time to make checks and seek advice. Here are some good tips.

Don’t take anything at face value

Scammers are often masters in the art of charming and confusing people into doing what they want them to. Do your own research before making any commitments.

Use the Financial Conduct Authority’s (FCA) ScamSmart Investment Checker

This free online tool allows you to check an investment or pension opportunity and avoid scams.

Don’t rush any major financial decisions

You might be tempted to act on your emotions, especially if you’re feeling stressed about financial issues. Take the time you need to feel confident in your decision. A genuine opportunity is unlikely to be here today, gone tomorrow.

Check the FCA’s Financial Services Register

This is a public record of UK-registered financial service providers. It also lists all known unauthorised firms and scams.

Check that a firm you are dealing with appears as a genuine business on this register and that they are authorised to transact in the UK.

Seek financial advice

Even the most financially aware and diligent person could fall foul of a clever and determined scammer.

So, seeking professional advice before making big decisions about your pension or committing to risky investments could give you the peace of mind you need or warn you off a fraudulent scheme.

Reporting a scam

If you have been scammed or suspect that you’ve been approached by a scammer, you should report it to Action Fraud, the UK’s national reporting centre for fraud and cybercrime.

For investment scams, you should also inform the FCA and, for pension scams, report to TPR.

Reporting scams will help to shut them down and reduce the number of fraudsters in circulation.

Get in touch

If you’re interested in making the most of your pensions and investments without risking being scammed, we can provide the support and guidance you need.

Please get in touch by email or call 020 8941 9779 to see how we can help you.

Please note

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