Britain’s financial regulator has issued a scam alert for potential investors – especially the over 55s with access to thousands of pounds from their pension funds.
The Financial Conduct Authority ScamSmart scheme believes the over 55s face a ‘heightened risk’ of falling prey to scams designed to separate them from their life savings.
This age group is now able to lay its hands on tens of thousands of pounds under the new pension freedom scheme and many are being tempted to take their money out of the scheme in the hope of earning more interest than is offered by the current record low rate.
They are prepared to put their money into riskier offerings in the hope of getting a better return. But FCA research has found that many are investing in unregulated products offered by unauthorised firms.
They are not aware that if things go wrong they cannot count on the protection afforded by the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS).
Cold calls, emails and unsolicited mail are all being used by scammers targeting the vulnerable investor.
More than a quarter of victims who have been scammed invested in unregulated products like land, diamonds, classic cars, gold, art or wine.
TV personality Nick Hewer – formerly Alan Sugar’s right hand man in The Apprentice – is one of those who has been targeted by the fraudsters.
He said: “Scammers are embedding themselves into people’s lives and pretending to be close friends of their targets, frequently the elderly and those living alone, before draining their life savings on a false promise of great returns through bogus investments. The tactics that these criminals use are very, very sophisticated – they could suck-in even the savviest of investors, something that everyone should be aware of.
“I, too, have been targeted by unsolicited calls from scammers and would advise that if you ever receive a call offering you the investment of a lifetime, just put the phone down, as I did.
“Go by the rule that if it sounds too good to be true, then it probably is. If the investment was that good, everyone would be investing. If you are still in two minds, go to the FCA website and check the warning list. My best advice: when you receive a cold call – just put the phone down.”
Mark Steward, director of enforcement at the FCA said: “Be sceptical. Be suspicious. Ask questions. Do your own checks before investing. Check the FCA ScamSmart website, the FCA warning list and the FCA register to see if those that are asking for your money are the real deal.
“If you do experience investment fraud or suspect it, report it. Our research found that 60% of those that have experienced investment fraud have not reported it, so the problem could be greater than we know and by reporting it you are helping us to protect others.”
A notice on the FCA website says: “Investment scams can look and sound believable, with smooth-talking salespeople, slick websites or sophisticated brochures and prospectuses. This can make it hard to tell them apart from genuine investment opportunities. But there are ways to spot and avoid scams.
“It might be an opportunity to invest in shares, property or rare goods, with the promise that the returns will be high and the risks to your money are low or non-existent. But generally speaking; the bigger the proposed return, the greater the risk.
“Remember: if it sounds too good to be true, it probably is!”