Scammers target people over 55 in £ 550m
Clever scammers who get rich quick tried to scam 80 percent of investors over 55 out of their savings in the past year.
Persistent scammers target those 55+ because they know they have access to their retirement and often need advice on how to best invest their money
But as scams become more sophisticated, it becomes more and more difficult to tell the authentic from the fake.
One of the main tricks of the scammers is the “guaranteed” return, which promises the investors above-average profits for the handover of their money.
Read on to find out how the scammers work and what you can do to protect yourself from their weasel words.
Tricksters trigger millions of scams
A look at the statistics paints a worrying picture of the enormous extent of the fraudster’s deception:
- Fraudsters targeted almost 80 percent of people over the age of 55 last year
- One in four would not assume that an investment opportunity is a scam if it offers a fixed profit of ten percent per year, which is well above average investment returns
- One in six people over 55 has no idea what to expect on investment, so they fail to realize that some of the investment opportunities offered to them are wrong
The big problem is the discrepancy between our perception of our ability to detect fraud from reality.
In general, as we get older, we think we are smarter, and 89 percent of the same group over 55 were confident that if they saw one, they would recognize a scam.
Younger people are realizing how complex it can be to identify if a potential investment is a red flag. Only 68 percent are sure they know the difference between an incredible return and fraud.
Pension fraud explained
Unfortunately, the number of investment frauds is increasing, mainly targeting older people looking for ways to further expand their retirement income.
The Times reports that between April 2020 and March 2021, over 23,000 people lost an average of Â£ 24,000 each to pension fraudsters. That adds up to a massive Â£ 554 million in stolen savings.
In the UK, total losses due to investment fraud by advisory firms regulated by the Financial Conduct Authority have tripled since 2018, with Â£ 570 million lost last year.
There are many different scams out there, but most try to lure people in with promises of cash upfront payments, time sensitive deals with limited availability or high returns at guaranteed prices well above the norm.
Typically, a scammer will try to coax you into cashing your pension or withdrawing a substantial amount of capital and handing the money over for you to invest on your behalf.
It’s not always obvious that it is a scam.
Lots of criminals give website details, email addresses, and literature that look legitimate – so do your homework.
But the most important sign to look out for is when someone you’ve never dealt with before contacts you out of the blue and offers free retirement or financial audits or advice.
You are unlikely to be able to unlock a pension before the age of 55 unless you are sick.
The fight against fraudsters
Several government initiatives target these scams but are not moving fast enough to tackle new scams as they emerge.
Here are some of the programs that are in place or under review:
- The Pension Insurance Act 2021 gives trustees the power to block pension transfers if they see evidence of possible fraud.
- The Online Harms White Paper published in April 2019 was presented in Queen’s Speech in May 2021 as a draft Online Safety Bill. The bill should be presented by December 2021.
- The Financial Conduct Authority regulates registered advisors and pension providers and publishes advice and guidance to help individuals avoid fraud.
Older people are good at recognizing common scams, with around 93 percent knowing that cold calling for pension reviews is likely to be fraudulent.
Another 96 percent know they should be careful when making investment decisions.
However, scammers have prevailed and changed their tactics, for example on social media where people are not on guard and are more prone to scams.
This is how you avoid investment fraud
There are four easy ways to spot likely scams and ensure you don’t make hasty decisions misled by unrealistic returns.
- Do not accept an offer that you are not expecting. Any cold marketing, targeted social media advertising, or email offering a way to increase your pension is likely a scam
- Make sure you are dealing with FCA regulated, properly registered companies. For example, the FCA must authorize anyone who offers financial advice. So check your cold calling caller in the FCA registry before answering.
- Take your time and never let a salesperson push you into making decisions that will affect your financial security in the long term.
- If in doubt, get a second opinion from a financial expert, lawyer or accountant you trust
If you are unsure whether an annuity or investment is genuine, contact the free government website, Money Helper, to discuss deals.
You can report suspected scams to Action Fraud or the FCA using their online reporting form.
There’s no rule against guaranteed returns, but providers don’t because they can’t predict the future. Most pension funds are third-party systems that are bundled under a product package. Since the provider has no control over the investment management, he does not make any return promises.
Every other investment has an inherent risk-return calculation, and even the most established fund manager cannot make rock-solid promises about your fund’s performance.
This is because any investment is subject to volatility that depends on the sector you invest in and the events and fluctuations that cause those returns to rise and fall.
There are undoubtedly low risk annuities out there, but you should approach any offer with guaranteed returns with extreme caution.
The quickest way to ensure that a financial services provider is authentic is to check the FCA register.
This database contains information about every financial institution that is registered and regulated with the FCA.
Note, however, that caution should still be exercised as some investment scams are reported by regulated companies, so FCA approval is not an absolute guarantee of a product’s authenticity.
If you fear that you have been outwitted into an investment fraud, you should contact your pension provider immediately.
You may be able to prevent a transfer from going through.
Next, report the scam to FCA Scam Smart and Action Fraud, who will give you a crime reference number and share updates on your case through an online system.
Another option, especially if you’ve transferred your retirement funds and can’t stop the transaction, is to make an appointment with Money Helper.
It is not always possible to recover all lost funds. Still, you can potentially claim some back and potentially file a claim for damages, so it’s important to consider your options.
Investments work in a balanced way, so a good financial advisor will always discuss your risk potential and your expectations for an investment product you have chosen.
A long-term, low-risk investment offers more modest returns but does not involve any higher risk and therefore you are unlikely to lose your money.
Higher returns always involve higher risk.
If you opt for a short-term, high-risk, but high-yield investment, you can earn significantly more, but with a correspondingly higher risk of loss.
While some scams target older people looking to boost their retirement budget, criminals also target younger people with fraudulent investment proposals.
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