Save, make, understand money

Getting Started

Investment scams on the rise as fraudsters switch tactics

Joanna Faith
Written By:
Joanna Faith

Financial fraud in the UK is evolving with more people falling prey to dodgy investment schemes than older-style pension liberation scams.

Reports of investment fraud almost doubled to 8,153 in the first six months of 2019 from 4,113 in the same period last year, according to data from the National Fraud Intelligence Bureau.

In contrast, reports of pension fraud have dropped rapidly from 1,353 in 2015 to just 345 in 2018.

The figures were obtained by investment firm AJ Bell through a Freedom of Information request.

Tom Selby, senior analyst at AJ Bell, said: “Financial fraud in the UK is mutating, with the number of victims of older-style ‘pension liberation’ scams dropping in recent years on the back of a series of Government interventions – including the ban on cold-calling – and a significant industry-wide public awareness campaign.

“However, as pensions-based scam reports have fallen, the number of people falling prey to scams focused on their investments has continued to rise and look set to hit record highs in 2019.”

In January, the government made pension cold-calling illegal in a bid to tackle the rise in pension scams. However, the ban excluded investments.

Selby said the government should review the exclusion in light of the surge in investment scam reports.

However, millions of people are still risk falling prey to pension scams – even those who consider themselves financially savvy.

A survey by the Financial Conduct Authority (FCA) published last week found that 42 per cent of pension savers – about 5 million people – could be at risk of falling for at least one of six common tactics used by pension scammers.

Nearly a quarter of 45 to 65-year-olds questioned said they would be likely to pursue exotic opportunities such as overseas property, renewable energy bonds, forestry, storage units or biofuels if offered them. However, these types of investments are high risk and unlikely to be suitable for pension savings.

Meanwhile, one in six 45 to 54-year-old pension savers said they would be interested in early access to their pension. However, accessing your pension before 55 is likely to result in a large tax bill and is rarely advisable.

Tips to avoid being scammed

  • Watch out for investment ‘opportunities’ that appear out of the blue and sound too good to be true. Schemes offering high guaranteed returns are often at the heart of pension and investment scams.
  • If you are cold-called about your pension or investments by someone you don’t know, hang up immediately.
  • Be extremely wary of anyone offering ‘free advice’ or a ‘free pension review’. Advice is never free.
  • If you are speaking to an adviser about your pension or investments, make sure they are regulated and check their credentials out via the FCA register.
  • Don’t be rushed or pressured into making a decision about your pension – such tactics should set off a big red warning light in your mind and are often indicative of a scam.