Would you recognise the latest scams targeting pensions and investments?

Covid-19 may have disrupted our lives, but it has not stopped the fraudsters. Laura Laidlaw considers new scams and how to protect your money.

As we all continue to adapt to living and working from home, more of us are spending more time than ever online. 80% of UK adults say that they are consuming more online content during the lockdown, according to a report by Global Web Index. While the power of technology has meant that we have been able to stay in touch with family members, order groceries and keep up to date with the news, there is a downside to the rise in people turning almost “fully digital”.

Unfortunately, scammers and criminals are seeking to exploit the current situation. That is why it is more important than ever that we all stay alert when we are online to help keep our personal information safe.

Pre-pandemic research from the Pensions Regulator (TPR) and Financial Conduct Authority (FCA) had already uncovered some concerning statistics around scams targeting those nearing or in retirement.

Now, the Investment Association (IA), has warned that these groups are at at particular risk of the rising number of Covid-19 related scams, as investment managers see a spike in fraudulent activity.

The warning comes as Action Fraud, the UK’s fraud reporting centre, recorded total losses of nearly £970,000 owing to Covid-19 fraud in February and March, with a marked increase in online fraud specifically.

Sadly, criminals never miss a trick, so we are urging savers and investors to be extra vigilant during this difficult time.

1) Be extra vigilant

UK regulators including the FCA and the Money and Pensions Service have told savers not to make any rash decisions in relation to their savings and investments.

Recently, the Association of British Insurers (ABI) warned of scams where imposters were promising great investment returns for pensions savers, using high-pressure sales tactics to pressure victims into time-limited offers.

Some of these scammers will agree to help people access their pension before the age of 55, putting savings into high-risk investment funds, or running off with funds. So it is worth remembering that there are only two main circumstances in which you may be able to access your pension savings before age 55 – when you are unable to work owing to ill health, or if your life expectancy is less than 12 months. Outwith these exceptions, it is not possible to access your pension before age 55 and people who do risk losing their money and are likely to be left facing a massive tax bill too.

Another new scam emerging is referred to as “fractional scamming” or “skimming”. Here, more conventional investment products will appear in an unnecessarily complex structure, usually featuring structured notes hiding multiple fees and high charges. 

This practice sees multiple entities taking a cut and the value of the underlying investments is destroyed. The scammers rely on pension scheme members not fully understanding the risks involved and what they are getting themeselves into when they agree to transfer their pensions.  

This reiterates the point about why it is imperative to know exactly how many pension pots you have, where they are – and ideally how much is currently invested.

Many of the current attacks have involved what is known as a phishing email that entices you to open them with the lure of containing “important Covid-19 updates”. When these links are clicked on, it can lead to malware infecting devices and stealing personal information.

For best practice, never click on links in emails. Instead, type the address in yourself, and always install the latest updates for your system, applications and internet security software.

2) Stay alert on social media

With the introduction of the cold-calling ban, scammers have changed their approaches to how they target their victims.

Some scams involve targeting people via social media, such as Facebook or Twitter. Usually, these will be cunningly crafted by a scammer to appear to be genuinely sent from a provider.

We also see complicated “get rich quick” schemes promoted through social media. Instagram or Facebook posts titled “Do you want to double your money immediately?” are carefully replicated to look legitimate and are often reinforced with videos of what appear to be celebrity endorsements.

Be wary of such advertisements: they are crafted by fraudsters to lure victims with pictures promoting luxury lifestyles of holidays and designer brands. To safeguard yourself against falling victim to these sophisticated scams, the number one question to ask yourself is “might this be too good to be true?”

There has also been a rise in using social media and texts to gain access to your finances by impersonating someone you know – spurring the coinage of phrases such as “TWishing” (using Twitter) and SMishing (using SMS).

3) Report your suspicions

Spotting a scam is not always easy, and with many people at the moment feeling vulnerable about the impact of this pandemic on their investments, the promise of generous returns could be extremely tempting. Remember that if you do fall victim to a fraudulent scheme, you can report any incidents or even suspicions to Action Fraud (actionfraud.police.uk). Alternatively, the National Cyber Security Centre (NCSC) has launched what it describes as a “pioneering” suspicious email reporting service (report@phishing.gov.uk).

Many fraudsters are convincing and appear legitimate. If you have any concerns, you can check whether the company is genuine at fca.org.uk/scamsmart.

If you are contacted out of the blue about an investment or pension savings opportunity, there is a major chance that it is a high-risk investment or a scam. The safest thing to do is to report it immediately.

If you have started a transfer and now suspect a scam, contact your pension or investment provider straight away. They might be able to stop it.

Laura Laidlaw, head of customer communications at Standard Life.