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BLOG: Pension Freedoms attract investment scammers

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
22/01/2015

At the time of writing, a headlining news story is detailing how up to 100 professional footballers have lost a collective £30 million in a bogus investment scam promoted by a fellow ex professional.

If ever there was a sign of the scammers targeting “big money” then this is it, but it’s not only the very high net worth individuals that are singled out by the unregulated salesmen and fraudsters.

There will always be those who try and trick others out of their wealth rather than earning it themselves and without doubt, cons and scams have become far more sophisticated over time as targets’ trust has become more difficult to obtain.

Low interest rates and volatile conventional investment markets might be the trigger for consumers, disappointed at poor returns and scammers have previously played on this persuading thousands of pension savers to move from perfectly good regulated pension schemes into SIPPs which previously may have accepted these rogue investments, some of which in hindsight had little if any substance.

However, SIPP operators’ have tightened their procedures and indeed the Financial Conduct Authority took steps to prevent the misuse of SIPPs, effectively cutting off this source of funding. Scammers took little time to rearrange their pitch to continue to promote their investments but this time to also introduce to their victims the Small Self-Administered Scheme (SSAS), another pension vehicle, more complex to arrange but importantly, perceived as being less well regulated and controlled.

The Pensions Regulator, which does regulate SSAS and HMRC are however already aware of the potential misuse of SSASs and the latter have introduced legislation requiring a “fit and proper administrator” which will be a party responsible for the tax affairs and reporting of each scheme. Scammers can see another door closing as the result of regulatory and professional bodies’ intervention.

So where will the next mutation take the scammers? Perhaps where there is no regulatory or professional body to intervene and just such a window has been opened by the pension reforms introduced by the Government. Whilst the freedom afforded by these proposals, due to come into effect from April this year are to be applauded, they do have the potential to put individuals in receipt of not only their tax free cash sum, but the whole of the remainder of their pension pot, albeit the latter subject to personal tax. Enter the opportunity to promote unregulated investment and scams to these individuals directly that needs no regulatory or professional body to approve the individuals own person investments.

So how can an individual spot the characteristics of a scam? Some of the common traits are set out below:

1. Have you received an unsolicited mailing or phone call out of the blue?
2. You have never heard of the investment or those promoting it.
3. Is the investment promising returns that appear to be good to be true?
4. Are you told the investment can’t be made through a pension fund?
5. Are the details of how the investment returns will be achieved vague?
6. Is there a limited timeframe in which to secure the “investment”?
7. You are not provided with full investment literature
8. Does literature refer to regulation of the investment by the Financial conduct Authority?
9. Does any literature refer to coverage by the Financial Services Compensation Scheme?
10. You are asked to keep the investment confidential as it is a “limited opportunity?

The FCA has recently published a guide: http://www.fca.org.uk/consumers/scams aimed at helping consumers’ identity scams and to prevent them being duped into losing money. The guide recommends approaching a regulated adviser if in any doubt.

If you are approached about liquidating your pensions to make such investments, please take time to consider the investment thoroughly. There is no such thing as silly question.