Scams & Unregulated Investments: Update & Warning

By April 9, 2019Pensions

You have spent years building your wealth to support your family and lifestyle. It would be a great shame to lose it to scammers, unscrupulous businesses and high-risk investments.

Yet every year that is exactly what happens. Since 2014 at least £42 million has disappeared from people’s pension pots due to fraud. Worryingly, the Financial Conduct Authority (FCA) says this is likely to be a fraction of the scale of the problem.

Safeguarding your hard-earned family wealth is one of our top priorities at FAS. In this guide, we are going to shed light on some of the latest scams so that you are armed with more knowledge to protect yourself.

The two main areas we will cover are pension scams and unregulated investments.

Pension Scams: What to Watch For

The UK government finally made cold calling about pensions illegal in January 2019 – after years of consultation. This is a welcome move.

This new law was brought in due to pensioners receiving fraudulent calls. People who were tricked by these calls lost, on average, about £91,000 in 2018 and some were even left penniless in retirement.

Despite the ban, however, there are still companies making unsolicited calls to people in the UK about their pension. Sometimes these businesses are based off-shore, far away from the reach of prosecution under British law. So you still need to be careful.

Please note that pension scams do not merely come in the form of unsolicited phone calls about your pension. They can also involve unexpected texts, emails or social media messages.

Be especially wary if you are in your 40s, 50s or 60s as these are prime targets for scammers.

As a general guide:

    Be immediately suspicious of any company that contacts you out of the blue about your pension(s). End the call if you do not recognise them.
    If a caller claims that they can help you access your pension before the age of 55, then it is almost certainly a scam. End the call and do not give out any personal information.
    Should a caller try to pressure you into acting quickly (due to a time-sensitive “offer”) then do not proceed any further with the conversation. Authorised Financial Planners are not allowed to pressure you into important financial decisions, so a stranger on the phone is certainly not allowed to either!
    If you are promised a deal which sounds too good to be true, then it almost certainly is. The main scam to watch out for here are promises of high investment returns with little-to-no investment risk. Almost always, investments with the potential for higher returns also carry a higher level of risk.
    Be wary of anyone offering a free pension review. This might be an attempt by a fraudulent person to access your financial information.

If the company you are speaking to is not FCA-authorised, then you should certainly not entertain a conversation with the caller. Either check the FCA register for the company name if you are at all uncertain about who you are dealing with or contact us.

Remember, a company is only allowed to contact you about your pension if they are FCA regulated and they have an existing relationship with you.

Unregulated Investments: Be on the Lookout

The tactics and issues surrounding pension scams are very similar to the dangers posed by people who try to sell you unregulated investments.

If someone contacts you unexpectedly about a “great investment” opportunity, and you have never spoken to them about it before, then you need to be very careful.

Generally speaking, we would urge you to end the conversation as soon as possible. Make sure you do not give away any personal information over the phone and try to record the name of the business that the caller claims to represent.

Remember, a company must be regulated by the FCA to provide the vast majority of financial services in the UK. If the business is not regulated, then you know not to deal with them further.

However, there is a chance that a caller might indeed represent an FCA-registered firm, but they are trying to sell you an “unregulated product”.

These financial products are high-risk and are not covered by the FCA’s rules or the Financial Services Compensation Scheme. That means you are unlikely to get any money back if you invest in the product and things go awry.

Once again, resist any claims which sound too good to be true (i.e. high returns and low / no investment risk) as well as any pressure to make quick decisions.

Be especially wary if the investment “opportunity” concerns bamboo, hotels, cryptocurrency or storage as these are unregulated products. For a full list of unregulated products, please see the FCA website here.

The Value of a Financial Planner

If there’s one valuable service that a good Financial Planner can provide, it is to give you a reliable “sounding board” and “firewall” against potential scams like the above.

Should someone contact you out of the blue about your pension or an investment opportunity, then you can ask us about it. We will be able to quickly detect whether or not it was a scam and advise you accordingly.

The value of a long-term, trusting relationship with a Financial Planner cannot be understated. It is certainly more reliable than someone you do not know, contacting you unexpectedly, offering grandiose promises and pressuring you to act against your best instincts!

If you are concerned about a recent call, email or message you received then please get in touch.