Be ScamSmart
23 August 18  /  Insights

The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have recently launched an advertising campaign to raise awareness of pension scams, with the hope of educating at-risk people on noticing a scam and what to do if they feel they are a victim.

Mark Steward, executive director of enforcement and market oversight at the FCA, said the size of individual pension pots made pension savings an attractive target for fraudsters and urged anyone who is thinking about transferring their pension to only use firms authorised by the FCA.

Whilst this campaign is specific to pension scams, it is important to be vigilant of all scams. Tactics to be aware of include:

• Cold calling being contacted out of the blue can mean there is an ulterior motive.

• Being offered a free review of finances this sounds like a high-pressure sales technique but can offer insight to your financial situation and encourage you to act rashly.

• Promises of high returns with little risk if it sounds too good to be true, it probably is.

• Offers of unusual overseas investments.


The FCA has comprised a list of useful tips to protect yourself from the most common types of scams:

• Treat all unexpected calls, emails and text messages with caution. Don't assume they are genuine, even if they hold basic information about you.

• Don't be pressured into acting quickly. A genuine bank or financial services firm will not pressure you into making a decision there and then and will give you time to think.

• If you're buying a financial product such as a loan, insurance, investment or pension, only use a FCA-authorised firm. You can check this on the FCA Register. Always access the Register from the FCA website, rather than through links in emails or on a firms website, as it might be part of the scam.

• Always double-check the URL and contact details of a firm in case a genuine firm, such as of your bank or investment firm has been cloned by a scammer.

• The FCA have a list of unauthorised firms and individuals that they have received complaints about. However, if the firm is not on the list, don't assume it's legitimate, as it may not have been reported yet.


Common scams include:

• Binary options - Scam firms may manipulate software to distort prices and pay-outs and then suddenly close consumers' trading accounts, refusing to pay back their money.

• Carbon credit trading - The scam may claim carbon credits are the next big thing in commodity trading, but you later find you cannot sell or trade the carbon credits, losing money.

• Cryptocurrency investment scams - Software can be manipulated to distort prices and investment returns. People may buy into non-existent cryptocurrencies. They are also known to suddenly close consumers' online accounts and refuse to transfer the funds to them or ask for more money before the funds can be transferred.

• Early pension release (before you're 55) - You are likely to end up paying 55% tax on what you spend before 55, except in special circumstances.

• Get-rich-quick - Targeting groups where a leader has been given a high return and they encourage others to partake in the scheme before it collapses.

• Ponzi schemes - Named after Charles Ponzi, who guaranteed a 50% return to investors in the US in the 1920s. Much of the money he received was used to pay dividends to early investors, and then the scheme collapsed.

• Pyramid schemes - Similar to Ponzi schemes, but investors are encouraged to recruit more people and are paid commission when they do.

• Graphene - Adding pressure to invest quickly to get the promised high returns. Because graphene is unregulated, it is difficult to confirm that you have even bought the genuine product.

• Land banking - Investors are told they will make big profits on small plots of land once planning permission is granted or development started, but permission is often not granted or even applied for.

• Pension reviews - Free pension reviews are designed to persuade you to move money in your pension pot into a high-risk scheme or a scheme that doesn't exist. Your pension pot is then invested in unusual investments you may not be familiar with. 

• Restricted US shares - Investors are often targeted by scams offering to get the restriction removed or saying they can minimise the loss on the investment.

• Share, bond and boiler room scams - Fraudsters might also try to sell you shares or bonds in a company that doesn't exist.

• Unauthorised forex (FX) trading and brokerage firms - Most consumers report they have initially received some returns from the firm to give the impression that their trading has been a success. They will then be encouraged to invest more money but at this stage or soon after the returns stop, their account is suspended and there is no further contact with the firm.

• Unregulated investment products - If you don't use an FCA-authorised firm, you also won't have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) so you're unlikely to get your money back if things go wrong.


Other most common financial scams include:

• Banking and online account scams

• Fake FCA emails, letters and phone calls (phishing)

• Foreign money transfer scams

• Insurance and warranty schemes

• Loan fee fraud

• Money transfer scams


Your Financial Planner can help protect you from fraudulent scams as you can ask for advice should you ever be approached. Your Financial Planner will also be aware of legitimate investments and will not encourage unregulated investments. 

Sources
FT Adviser - www.ftadviser.com/pensions
The FCA - www.fca.org.uk/consumers/protect-yourself-scams