A recent survey reported by Professional Adviser revealed that 2 in 5 wealthy individuals have been the victim of financial crime. In a survey of 2,000 individuals possessing assets over £250,000, 41% disclosed they had experienced scamming attempts, with over a third of these incidents occurring in the past six months. Among those affected, 20% suffered losses due to investment fraud, while 15% were cheated through pension and financial scams.

Pension and investment schemes are prevalent ways scammers target wealthy individuals. Continue reading to learn about the mechanics of these scams, warning signs to be aware of, and steps to take if you’re caught in a financial fraud situation.

Investment scams

Investment scams aim to deceive you into relinquishing your wealth, either through entirely fictitious schemes or ones designed to charge you more than they could ever return. Spotting these scams can be challenging because they often come disguised with professional-looking websites, convincing client testimonials, and other persuasive marketing materials.

The variety of investment scams has expanded, and with the rise of digital communication and the internet, they have become more sophisticated and harder to identify.

Indeed, according to UK Finance, in the first half of 2023, victims of investment scams collectively lost £57.2 million. 

A particularly infamous type of investment fraud is the “Ponzi” or “pyramid” scheme. In these scams, new investor funds are used to pay returns to earlier investors. This cycle continues until the money owed surpasses what is being brought in, ultimately causing the scheme to fail and leaving investors with significant losses.

How to spot an investment scam

Regarding investment scams, there are several warning signs to watch out for:

  • Cold Calls: Be cautious of unsolicited calls, particularly if the caller insists on contacting you multiple times in a brief span. If you’re unable to reach them through a return call or find additional contact information, it might indicate a scam.
  • High-Pressure Sales Tactics: Scammers frequently employ aggressive strategies to pressure you into making hasty decisions. They might claim that the opportunity is time-sensitive or available to only a limited number of investors.
  • Too-Good-To-Be-True Offers: Skepticism is warranted when presented with investment opportunities that promise exceptional returns with minimal risk. Scammers often lure victims with the promise of high rewards while downplaying potential dangers.

Pension scams

Pension scams manifest in various forms, yet they commonly dangle the prospect of early access to your pension funds, contingent on you transferring your pension pot.

Scammers may try to coax you into liquidating your pension or borrowing against it, only to hand over the funds to them under the guise of investment.

In another scenario, a fraudster might persuade you to shift your pension savings from your existing pot to a new one, allegedly offering higher returns.

Since April 2015, the ability to self-manage your pension pot has been simplified once you reach the age of 55, a threshold set to increase to 57 by 2028. This change, while offering more flexibility, has unfortunately also made it simpler for scammers to perpetrate fraud. It’s crucial to be aware that if you are under 55, withdrawing cash from your pension will lead to substantial penalties, except under extraordinary conditions.

Yet, according to an FTAdviser report, between 2020 and 2022 more than £26 million was reported lost through pension scams to the City of London Police’s National Fraud Intelligence Bureau. This figure could be the tip of the iceberg as some victims may not realise they’ve been scammed straightaway. 

To spot a pension scam, pay attention to these warning signals, similar to those for investment scams:

  • Cold Calls: Since pension cold calling was banned in 2019, any unsolicited calls about your pension should be disregarded.
  • High-Pressure Sales Tactics: Be wary of aggressive approaches pressuring you to make immediate decisions.
  • Guaranteed Superior Returns: Offers promising better returns than your current pension should raise suspicion.
  • Early Access Offers: Be cautious of proposals to “unlock” or “liberate” your pension pot, especially if you’re below the age of 55.
  • Unusual Investments: Offers involving unconventional investment opportunities may be risky.
  • Complex Structures: Schemes with intricate arrangements involving multiple parties, each charging a fee, should be avoided.

How to avoid scams

As the survey’s research reveals, financial scams are unfortunately a common issue among affluent individuals. But, there are multiple strategies to evade them.

Firstly, a solid guideline is to dismiss any unsolicited calls. If you’ve already answered and something seems amiss, feel free to hang up. It’s always possible to call back or reach out proactively if the caller is genuine.

It’s essential to remember that credible institutions, like banks or insurance companies, will never request your password or sensitive data.

Lastly, should you find yourself in conversation with someone pitching an investment or pension plan, resist any aggressive sales techniques. If an offer piques your interest, refrain from making immediate decisions and seek additional counsel first.

You may want to research the firm that has contacted you. For example, you could find out if they are on the Financial Conduct Authority (FCA) register or on the FCA warning list, check their HMRC status, or research their reputation online.

If you’ve been presented with an opportunity, feel free to consult with us; we can assist in verifying its legitimacy.

Moreover, it’s crucial never to divulge your passwords or banking information, nor to install software from untrustworthy sources.

What to do if you think you’ve been scammed

If you think you have been the victim of financial fraud there are a few things you can do.

Get in touch

Should you ever be approached in any manner mentioned previously, or encounter any situation that raises your suspicions, please don’t hesitate to reach out to us for a discussion. For more guidance on steering clear of financial scams and steps to take if you find yourself targeted by one, we’re here to help.

Please be aware: This blog serves purely for informational purposes and should not be taken as specific advice. It is intended solely for retail clients.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.  

Investments carry risk. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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