FCA and Pensions Regulator step up warning of scams amid covid-19 lockdown

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FCA and Pensions Regulator step up warning of scams amid covid-19 lockdown

The Finanial Conduct Authority, the Pensions Regulator and the Money and Pensions Service (MAPS) have issued a joint warning of sharply rising levels of vulnerability due to covid-19 lockdown likely to be targeted by scammers.

The FCA, the UK financial services regulator, said: "Fraudsters will exploit the coronavirus to prey on anxiety and fear of savers and investors, especially those who may be vulnerable."

Those facing employment uncertainty likely to be targeted with ‘early access' pension offers, while Coronavirus-based investment scams have already been reported to Action Fraud. Over £1bn was lost to fraud and scams in 2018 alone.

Fraudsters will exploit the coronavirus to prey on anxiety and fear of savers and investors, especially those who may be vulnerable.”

Tom Selby, senior analyst at AJ Bell, commented: "It is good news the regulators, in conjunction with government-backed guidance service MAPS, are going on the front foot by warning savers about the dangers posed by pension scams.

"With the country in lockdown and millions of people either isolated or facing job insecurity, it is inevitable unscrupulous fraudsters will ramp up their efforts to part people from their hard-earned pensions.

"These dodgy schemes take many forms, from investment-based scams targeting investors who are starved of income to ‘early access' pension offers aimed at those who may be struggling to make ends meet.

"There are tell-tale signs to look out for when it comes to spotting scams. Often salesmen will use high pressure tactics to get you to part with your cash, with the investment in question claiming to guarantee sky high returns on your money. Usually these returns are either wildly exaggerated or a complete fabrication.

"While getting access to your pension before age 55 may be tempting during this period of uncertainty, doing so will as a minimum see you hit with a 55% unauthorised payment charge from HMRC in the first instance.

"At best you'll then be subject to eye watering charges as well, meaning you only get a fraction of your pension back and your retirement prospects are left in tatters. In reality, many people lose everything as a result scams such as these."

Savers must protect themselves
Research published by the FCA and the Pensions Regulator last year found almost half of UK adults aged 45-65 with a pension said they would take one or more actions that could expose them to common scam tactics.

Selby cautioned, "So while the authorities are right to focus on vulnerable people, anyone can become the victim of fraud if they don't have their wits about them.

"Scammers' tactics are evolving all the time and increasingly we see complex schemes promoted online through social media. This virtual Wild West is a natural home for fraudsters, with Governments around the world struggling to create meaningful protections for consumers."

"Ultimately the best way to protect your pension is to arm yourself with the tools and knowledge to spot a scam and steer clear," he added.

Top tips
AJ Bell listed five tips to avoid becoming a pension scam victim

  • Watch out for investment ‘opportunities' that sound too good to be true. Schemes offering high guaranteed returns are often at the heart of pension and investment scams. 
  • If you are contacted out of the blue about your pension by someone you do not know, either by phone, email, text message or on social media, do not respond.
  • Be extremely wary of anyone offering ‘free advice', a ‘free pension review' or ‘early access' schemes. Advice is never free and you are not allowed to access your pension before age 55 unless you have serious health issues.
  • If you are speaking to an adviser about your pension, 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.

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.