A survey by City watchdog, the Financial Conduct Authority (FCA,) has revealed that more than one in four people over 55 – 27% – who were victims of investment fraud had been persuaded to put their money into unregulated products sold by unauthorised firms.


New pension freedoms allow those reaching age 55 to withdraw some, or all of their pension pot, and faced with poor investment returns in the enduring  low-interest economy, many are falling victim to unscrupulous scammers promising better returns from investments such as wine, diamonds and land.

Unregulated products sold by unauthorised firms are not covered by the Financial Ombudsman Service or Financial Services Compensation Scheme meaning that if something goes wrong, investors could lose some or all of their money.

However, a survey conducted by the FCA found that 13% were unaware that they would have no protection and 48% of those that invested in unregulated products had done so without getting professional advice or checking publicly available investor information; the FCA maintains a warning list which details firms and individuals that are known to be operating without its authorisation.

‘if something goes wrong, investors could lose some or all of their money’

From its survey of 2,300 people, FCA concluded that many pensioners were considering riskier investments because of the low interest rates on offer, identifying that 41% of over-55s had moved their money out of savings accounts in a bid to achieve a better rate of return.

Of those, more than a quarter had put their savings into unregulated investments and products, while 23% said they were considering investments with which they were unfamiliar.

The FCA said that potential investors were mostly approached by cold callers, or via post and email and that there had been a market increase in such activity of late.

In the past twelve months almost one third of over 55s had been contacted by a firm they never heard of, offering investment opportunities, with 40% identifying that there had been an increase in the number of such calls.

The FCA’s survey was conducted ahead of its much heralded ScamSmart campaign which is aimed at protecting investors from investment fraud.

As the old adage would have it, if an investment opportunity looks to be too good to be true, it invariably is; Mark Steward, director of enforcement at the FCA, urged investors to be sceptical and suspicious when approached by firms offering high-risk investments.

‘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,’ he said.

‘If you do experience investment fraud or suspect it, report it’, he added.

Although not all unregulated investments are scams, experts warn that the vast majority are unsuitable for private investors because of the level of risk they involve and the lack of protection; three quarters of unregulated investments are believed to lose money, with some schemes levying fees of up to 20%

The levels of fraud that have been unearthed may in fact underestimate the size of the problem as previous research by the FCA found that 60% of those who have experienced investment fraud did not report it.

Mr Steward continued ‘you don’t need to be gullible to lose money to a scam or fraud. Fraudsters target financially sophisticated people too, who often don’t like to ask what sound like silly or basic questions.

The FCA’s campaign is backed by former star of The Apprentice , Nick Hewer, who said he had been targeted by cold call scams – ‘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’, he said.

He added: ‘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.’

‘you don’t need to be gullible to lose money to a scam or fraud’

More than £1.2billion is lost to investment scams in the UK every year and FCA research found that those over 65 with savings of above £10,000 were three and-a-half times more likely to fall victim to investment fraud, compared with the wider population; those in London, the Home Counties and the South East were particularly vulnerable.

With billions of pounds being freed up, such scams are an unfortunate and thoroughly unwelcome result of pension freedom.

As previously exposed on DIY Investor (Beware Pension Scams – 4th March 2016) common tactics used by scammers include promising very high returns from overseas investments,  new or ‘creative’ investments, or those claiming to be able to exploit ‘loopholes’ that would allow the pensioner to withdraw a lump sum larger than the 25% that is currently allowed to be taken tax free.

Gareth Shaw, Head of Consumer Affairs at Saga Investment Services, said that over 65s were particularly vulnerable to scams and fraud, adding ‘losing a few thousand pounds in a scam is bad enough, but now that consumers have the ability to pull all of their pension savings out in one go and thereby have access to potentially hundreds of thousands of pounds to invest, the risk posed to their financial well-being could be potentially catastrophic.’


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