Pensions  

Scam smart: Six ways scammers are targeting vulnerable individuals

Scam smart: Six ways scammers are targeting vulnerable individuals

Just when we think we are getting wise to one type of pension scam, another pops up. This summer the Financial Conduct Authority and the Pensions Regulator are again warning the public to be careful by highlighting how easy it is for scammers to convince them to part with their money. 

The FCA and TPR quote research figures by Censuswide that indicate more than 5m people across the UK could be at risk from these types of scams. Below is an analysis of the most popular types of scam currently in use.

Exotic investment opportunities

Investing in something that seems exotic and mysterious may well add some excitement to the not-so-exciting world of pensions, but these ‘opportunities’ are generally very high risk. 

Investments such as overseas properties, renewable energy, forestry or biofuels can sound safe enough to the non-professional. But even if they are currently a legitimate investment, funds could be very difficult to get back once they have left the country.

Regulation in other jurisdictions may not be as strict as in this country, for example. Hence the funds handed over may well be used for illicit purposes rather than the purpose the client had been led to believe. Even pension professionals may find it difficult to ascertain if these investments are legitimate, so being approached directly just adds to the overall risk and should be met with increased caution. According to the research quoted by the FCA and TPR, 23 per cent of 45 to 65-year-old pension savers would pursue an offer of high returns in one of these types of exotic investments.

Calls out of the blue

Calls out of the blue, or cold calling as it is known, are now banned for pensions, but the legislation is only enforceable for those calling from the UK or offering UK services. For calls originating outside the UK, the regulator is somewhat toothless in preventing or prosecuting these scammers. 

Targeting individuals through cold calling is nothing new, nor is it isolated to pension funds, but as the latter are one of the largest investments that people will ever accrue, they are naturally very appealing to the scammers.

The callers won’t necessarily be asking clients to access their pensions and pass the funds to them directly, but may be trying to encourage further engagement by visiting a website or agreeing to take some pensions ‘advice’ from them. The cold call is likely to be just the start and lead to another of the scams discussed here.

The main thing to remember is that the callers shouldn’t be calling in the first place. The cold-calling ban came into effect on January 9 2019; any unsolicited calls about pensions are now illegal. Breaking the law is never a good start to any financial relationship.

The research cited by the regulators states that 23 per cent of 45 to 65-year-old pension savers would engage with a cold call from a company asking to discuss their pension plans. If a company does call, they should be reminded that they are breaking the law and can face fines of up to £50,000.