Top five pension con tricks revealed
A pension fraud campaign group has highlighted five signs that should set alarm bells ringing and alert you to the fact you and your savings could be the target of a sophisticated scam.
The list, from Pensions Life, is published as figures from the City of London Police show that in the year to February 2016, retirees lost pension savings worth £13.2million, an increase of 26% on the previous year.
1.The promise of guaranteed returns
Angela Brooks, chairman of Pensions Life says the alarm bells should start ringing if you receive an offer with ‘guaranteed results’, often in the region of 8%-9%.
“In the real world, there is no such thing as a guaranteed return. It is a hook to catch people who are, quite understandably, keen to grow or improve their pension.”
2. Speculative property investments
British investors love property – it’s tangible and easy to understand – but pension fraudsters are using this fact to their advantage, selling highly speculative investments often offshore.
Ms Brooks warns: “The scammers will promise spectacular growth opportunities with all sorts of unusual – or ‘esoteric’ - property developments.” However, property is notoriously illiquid, meaning retirees may struggle to get their hands on their cash when they need it.
She adds: “If it is all tied up in long-term, speculative property, it can take years to get out of the investment, and an early redemption might attract punitive penalties.”
Action Fraud also recently warned about a scam where over-50s were targeted with collective investments in property, including hotel developments on Cape Verde.
3) Investments and advisers are not regulated
Before you invest any of your savings it is vital you ensure both the investment, and the person you are receiving advice from, is regulated in the UK by the Financial Conduct Authority (FCA).
In the case of the Cape Verde developments, the collected investment schemes savers were being asked to invest in were unregulated and should not have been promoted to savers in the UK.
Ms Brooks says: “If there is no regulation, there is no protection. Don't be fooled into being assured that a firm is regulated when it isn't. Phrases such as; ‘Company X works in conjunction with a fully regulated and authorised company’ usually means Company X is not regulated. If an unregulated fund goes bust, then the investors have lost everything and there is no protection.”
4) When a firm looks like an adviser but isn’t
Pensions Life says the over-50s must be aware of schemes that are presented by firms that may look like advisers but will claim that you were not given advice – in other words making it look like you were not acting on their recommendations.
Ms Brooks says: “When the whole scheme goes pear-shaped, the firm responsible - which could even be an FCA-regulated firm - will try to claim they did not provide advice - they just offered the scheme and left it to the participants to make up their own minds as to whether it was suitable for them.”
5) When there has not been a proper assessment of your risk profile
Before recommending any investment a regulated adviser will assess your risk profile with a question and answer fact find process.
Ms Brooks says: “Any investment recommendations should respect the individual's risk appetite. Most ordinary people are ‘low-risk’ - but the scammers often try to trick victims into agreeing they are ‘sophisticated’ or even ‘high risk’.”
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.