Don’t be shy, ask ii… how do I spot an investment scam?

Investment scams are a threat that everyone needs to be on the lookout for. One ii reader recently got in touch regarding a suspicious share deal he was drawn into.

A customer asks: some years ago, I foolishly allowed myself to be persuaded to buy shares in a company called Anscott Industries Inc. It's so long ago that I can't remember whether I received a share certificate and certainly don't have one now. I put it down to experience. However, it would seem I still own the shares and received an offer to have them recertified.

The offer is very attractive, particularly for an investment I had written off, but having been caught once I obviously don't want to fall into the same trap. I don't understand why $7,000 is required to cover a recertification. I appreciate there would be a cost to obtain fresh certificates, or even to reclassify them, but the amount seems excessive and for it then to be refundable does not make sense to me.

Something doesn't ring true here and I "smell a rat". Any information you can provide would be welcome.

Myron Jobson, personal finance campaigner at interactive investor (pictured) says: It is impossible for us to confirm or otherwise whether this correspondence is bona fide. However, having carried out a quick search on the internet, the following link pops up, which may help. https://www.fca.org.uk/news/warnings/raden-capital-ventures

The request for a Recertification Deposit, and being asked to send money following an unsolicited correspondence, is definitely a red flag. Were you provided with any contact email address? Also, it is perhaps worth researching Anscott Industries to find out whether the company does still exist. Can you locate registrar details, or a company address? It’s always worth checking industry regulator, the Financial Conduct Authority’s (FCA), ScamSmart website to see if the offer is a known scam.

A common problem

Investment scams are common, unfortunately. ii’s Great British Retirement Survey 2020, which attracted responses from over 12,000 UK adults, found 13% of respondents admitted to having been scammed, rising to 18% in the 72-77 age category, and 20% amongst those aged over 77.

Investment fraud (32%) followed by current account fraud (22%) were the two most common cited types. Some 43% said they got their money back, and of those scammed, 11% said it had put them off attempting to put their financial affairs in order, for fear of being scammed again.

Romance and holiday or property scams were also frequently cited in the verbatims.

New research by Citizens Advice found that while over-55s are most likely to be targeted, those 34 and under are almost five times more likely to fall victim to a scam than their older counterparts.

Here are some top tips on how to reduce the likelihood of falling victim to scams.

• Six things you must do before buying any share
• Mind & Money: how to cope with investment loss

Look out for the tell-tale scam signs

Cold calling relating to pensions has been banned since 2019, but that still doesn’t stop unscrupulous individuals from using this method to scam people out of their cash.

No reputable pensions firm would call you out of the blue to suggest you transfer your retirement nest egg to a better deal. When in doubt, simply hang up.

Also beware of things that signal illegitimacy. If the firm doesn’t allow you to call back, it is most likely because it is a fraudulent enterprise. Also beware of firms that only list mobile phone numbers or a PO box address on their website.

Fraudsters may try to tempt you in by offering free pension reviews. Don’t fall for it. It could be a trick to get you to share personal information.

• Discover more Don't be shy, ask ii questions here
• Examine the pension savings habits of investors at different life stages

If it sounds too good to be true, it usually is

There is no such thing as a free lunch when it comes to your finances. If you come across a proposition that promises ridiculous returns and downplays risk, it probably is too good to be true.

Before you commit to any offers, make sure you do extensive independent research on the company and make sure you check all the information yourself – don’t just take their word for it.

There are no shortcuts when it comes to financial management, but help is available. The government’s free and impartial pension wise service is a good first port of call, offering guidance on options for those with a defined contribution pension.

Do your due diligence

Be suspicious of any unsolicited correspondence on pension transfers. Why take the risk? Have a look at the FCA’s ScamSmart website to see if the offer is a known scam. You should only deal with financial services firms that have been authorised by the City watchdog.

If you deal with an unauthorised firm, you will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme safety net if things go wrong.

Don’t rush

Don’t be pressured into scoring a spectacular own goal by transferring over your hard earned cash without doing your own research and shopping around. It is important to heed the words from the FCA and The Pensions Regulator – unlike football, there is no deadline when it comes to pensions.

Workplace pensions need careful consideration as they may have additional benefits, such as life insurance, which could be costly to replace.

If your employer is still making contributions to a workplace pension, they are not required to pay into a new plan instead.

If you’re thinking of transferring any ‘safeguarded benefits’, such as pensions with a guaranteed annuity rate or a defined benefit pension worth more than £30,000 you must seek professional financial advice.

• Golden rules for ISA investors: before you invest, pass these tests
• Check out our award-winning stocks and shares ISA

Beware of offers to unlock your pension before age 55

Schemes that offer to unlock your pension before age 55 should be avoided at all costs.

These schemes, also known as pension liberation and pension loans, are trying to get you to break the law and are likely to result in you paying huge administration costs and big tax bills, in some cases leaving people with no savings for retirement.

Only in very rare cases, such as very poor health, is early access to pensions possible.