Have you received a call to tell you about a phenomenal investment opportunity, with a guaranteed return?
Perhaps the person on the end of the phone has offered to review your pension free of charge? Or maybe they can simply give you early access to your pension before age of 55?
Fraudsters can be articulate and financially knowledgeable, with credible websites, testimonials and materials that are hard to distinguish from the real thing. Even the most financially astute have been lured in.
At Prosperis, we are trying to make clients aware of the problem. However, this is not a battle to be won alone. We, as a professional firm, are in a key position to alert our clients to the danger of fraud, including scam warning signs, tricks and pitfalls. Together with employers and providers, we can continue to raise awareness and put pressure on the government to make further changes to legislation.
Measures, first announced in August 2017, could seriously deter the activities of scammers and raise awareness of the dangers of fraud among the general public. The longer the government prevaricates, the greater the danger savers will be targeted by fraudsters.
The scale of the problem
There is no doubt scams are on the increase. Government figures indicate £43 million has been unlawfully obtained by scammers since April 2014, with those targeted having lost an average of nearly £15,000, as scammers try to encourage savers to part with their money with false promises of unique low-risk, high-return investment opportunities.
Citizens Advice has calculate 10.9 million consumers have received unsolicited contact about their pension alone in 2016. This includes 2.4 million consumers aged 55-64.
The scale of the problem is being taken seriously – the government is in the process of planning new measures to protect savers. The question is, will they be enough?
Measures under discussion include a ban on ‘cold calling’ in relation to pensions, including emails and text messages, a tightening of HMRC rules to stop scammers opening fraudulent pension schemes and tougher actions to help prevent the transfer of money from occupational pension schemes into fraudulent ones.
However, the Department of Work and Pensions has said the legislation would be tabled “when parliamentary time allows”, so it could be many months before the rules come in, but action is needed now – in the first five months of 2017, almost £5 million was obtained by pension scammers.
The government has made some progress by introducing draft legislation to stop scammers opening fraudulent schemes. From 6th April 2018, all new occupational schemes have to have a sponsoring company operating as an ‘active’ company. This requirement will apply to existing registered schemes and HMRC will have the power to de-register any schemes with a dormant employer.
Spotting the hallmarks of a scam
Often, we spot potential scams before our clients. We are far more likely to spot the hallmarks, such as illiquid, unregulated, unusual high risk investments, sometimes offering high guaranteed returns. The indications of a scam may include:
- a free pension review
- the promise of guaranteed returns on their investment
- low tax / tax-free rates, including tax-free lump sums
- exotic sounding and/or overseas investments, and
- pressure to sign up quickly to avoid missing out
How can you avoid pension scammers?
The foolproof way of avoiding cold callers is to avoid answering the phone, but that is not very practical, so how can you avoid falling foul of potential scammers?
Firstly, you really need to ignore and report unsolicited calls. Promises of unrealistic returns are likely to be from fraudsters.
You should always check if a firm is authorised by the FCA. If they are not, it is probably a scam. Check the FCA’s Financial Services Register to see if a firm or individual is authorised or registered with the FCA. If there are no contact details on the Register or if the firm claims they are out of date, call the FCA Consumer Helpline on 0800 111 6768.
Please remember if you use an unauthorised firm, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong and you are unlikely to get any of your money back.