4 mins
Spotting a scam is crucial if you want to protect your hard-earned savings. Scammers target people from all backgrounds, ages, and income levels. No one specific group is more likely to become a victim to a scam than another - any one of us could be vulnerable.
The advancement of Artificial Intelligence (AI) means that scams are becoming more sophisticated and believable, and because they appear more genuine, they may catch you off guard when you are least expecting it.
As the scammers find new ways to deceive people into handing over their money or persuade consumers to share valuable information such as passwords or account details, it is vital that you stay informed about the latest scams.
Here are some tips to help you identify potential pension scams:
Is it too good to be true? Be cautious of offers that sound too good to be true, such as loopholes for tax-free withdrawals, high returns from overseas investments, or accessing your pension before the age of 55.
Don’t be pressured into anything. Scammers may pressure you into making a fast decision. Remember, you should never feel rushed into any decisions you make about your pension – always do your proper research or take professional advice before taking action.
Think twice if you receive unsolicited contact. Be very wary of unsolicited phone calls, texts, or emails about your pension. Legitimate companies will typically not contact you out of the blue.
Be wary of single investment schemes. Financial advisers generally recommend diversifying your investments. If someone suggests putting all of your pension fund into a single investment, it could well be a scam.
Look for traceable contact details. Scammers often provide limited contact information such as mobile numbers or PO box addresses. Legitimate companies should have traceable contact details and a physical address.
Check for penalties. If you're considering withdrawing your pension early, ensure that you understand any penalties involved and, for workplace pensions, whether your employer's agreement is required. Generally, you can only take money from your pension when you reach 55 (increasing to 57 by 2028) or older except in certain circumstances, such as having a terminal illness. If you do withdraw your pension before retirement age, depending on your circumstances you could face a tax bill of 55%, plus other charges, on what you withdraw.
Remember, safeguarding your pension is crucial for a secure financial future. Always take the time to research and consult with professionals before making any decisions related to your retirement.
Investment and trading scams
Unfortunately, investment and trading scams are also common, and you should be aware of the various types to protect yourself from potential financial loss.
Here's an overview of some typical investment and trading scams:
Crypto assets: Scammers promise high returns from investing in cryptocurrencies or related products, often using fake websites or social media profiles to appear legitimate.
Share, bond, and boiler room scams: Boiler room scams involve high-pressure sales tactics to sell overpriced or worthless shares and bonds. The scammers usually operate from a temporary office (hence the term "boiler room") and disappear once they have received your money.
Recovery room: In this scam, fraudsters target victims of previous scams, claiming they can help to recover lost funds for an upfront fee. Once the fee is paid, the scammers disappear.
Get-rich-quick: These scams promise unrealistic returns on investments with little to no risk, often involving pyramid or Ponzi schemes. In such schemes, money is collected from new investors to pay previous investors - eventually, the money owed is more than the money being collected and the scheme collapses, leaving all of the investors out of pocket.
Land banking: Scammers sell plots of land with the false promise of substantial profits when the land is developed. However, the land is often unsuitable for development or needs planning permission.
Binary options: Scammers lure investors into betting on whether the price of a commodity, currency, or index will rise or fall within a short timeframe. These platforms are often rigged, making it nearly impossible for investors to profit.
Carbon credits: Fraudsters sell carbon credits (permits to emit CO2) as investments, claiming they will increase in value. However, these credits are often overpriced or worthless, and there is no viable market for selling them.
Forex (FX): Scammers offer high returns on foreign currency trading, often using fake trading platforms that manipulate results to make it appear as if the investor is making a profit. When the investor tries to withdraw their funds, the scammers disappear.
Online trading: Scams involving online trading platforms may involve fake or unregulated platforms, phishing attempts to steal login credentials, or manipulative tactics to make you invest more money.
To protect yourself from scams:
Always research the company or individual offering the investment. Check the FCA register of regulated companies on the FCA website.
Be cautious of unsolicited offers and high-pressure sales tactics.
Verify the legitimacy of trading platforms and ensure they are regulated.
Seek professional advice from a certified financial professional before making any investments.
Never invest more than you can afford to lose.
If you think you have been scammed, take immediate action to protect yourself and others.
If you've been scammed or suspect fraudulent activity, you must take immediate action to protect yourself and potentially help others to avoid becoming victims.
For pensions, if you’ve already agreed or signed something that you are now not sure about, get in touch with your pension provider straight away. They might be able to stop a transfer before it happens.
If you think you’ve been targeted by a scam, report it via the FCA ScamSmart website.
If you’ve been targeted, even if you’re not a victim of the scam, you can report it to Action Fraud on 0300 123 2040 or use the online reporting tool on the Action Fraud website.
In Scotland, report the scam to Police Scotland on 101 or Advice Direct Scotland on 0808 800 9060.
If you've shared sensitive information or made payments to the scammer, immediately contact your bank or financial institution. They can help secure your accounts and prevent further losses.
Keep a close eye on your accounts for any suspicious activity.
Update your passwords for online banking, email, and any other accounts that may have been compromised. Create strong passwords and use different passwords for each account. A strong password should be at least 10 characters long and use a combination of letters, numbers, cases, and symbols to form an unpredictable string of characters that doesn't resemble words or names.
Be cautious of future scams. If you've been targeted once, scammers might try to target you again or sell your information to other criminals. Be extra vigilant and cautious of unsolicited offers or unexpected communications, especially those involving fees for recovering lost funds or investments (recovery room scams).
Seek professional advice. If you need clarification on an investment or financial opportunity, consult a certified financial professional before proceeding.
Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
FP2024-332 - Last update July 2024