FAQ - How do I protect myself from pension and investment fraud?


FAQ - How do I protect myself from pension and investment fraud?

Although retail financial advice is heavily regulated, there is considerable scope for the dishonest to make a good living from exploiting clients and stealing their money. Both the Financial Conduct Authority, (FCA), and The Pensions Regulator, (TPR), have been active in educating the public about the nature of scams and how to avoid them.

For our part, as independent financial advisers, we would encourage clients and prospective clients to use the resources available to them from the FCA and TPR, and even ask us to fact-check any issues that are not clear to them.

The Pension Regulator (TPR) and the Financial Conduct Authority, (FCA), have launched the ScamSmart initiative, backed with television adverts, which includes a four-step process:

Step 1 – Reject Unexpected Offers

Step 2 – Check who you are dealing with

Step 3 – Don’t be rushed or pressured

Step 4 – Get impartial information or advice

You can find more details on the initiative here

The usual warning around any kind of fraud is “If it seems too good to be true, it probably is”; but without a frame of reference, this is not a terribly helpful statement.

Statements as below, whether said, implied or written, mean you should probably quickly close the meeting, put the telephone down or make your excuses and walk away:

  • “10% return, absolutely guaranteed” – only cash deposits are really guaranteed and any return of more than 1.5% in the current market is suspicious. Some retail bank accounts offer more than 1.5%, but these will have strings attached, which you need to know about.

  • “Of course, we can let you access your pension before 55” – no, this is “pension liberation” and HMRC will not allow it. If you do, fraud or not, HMRC will demand an unauthorised payment penalty, further draining your remaining assets

  • “Can you confirm that you are one of the following:- a sophisticated investor, a high net worth individual, a professional investor or a non UK resident” – this suggests that the investment suggested is not a “retail investment”, but outside of the regulated environment. If the investment goes bad for any reason, you will have no recourse, (or at least, very limited access), to consumer protection like the Financial Services Compensation Scheme, (FSCS), or the Financial Ombudsman Scheme, (FOS). 

  • “It’s too complex to explain. You don’t need to know the details, leave it to me” In simple terms; if you cannot understand the investment, just do not do it. 

  • “I get commission from the provider of 10%” – anything above 5% these days is a red flag. Financial Services retail commissions will normally be 1-5%, so more than this suggests you need to pay attention and, most likely, walk away.

  • “I’ll send a courier to get your signature on the papers and your cheque” – almost nothing in financial advice is that urgent. Good financial advice is considered, a bit bureaucratic and has a compulsory cooling off period. Needing to do something now, is very rare; even plans with time limits will normally have a 14-30 day window.

  • “Once in a lifetime opportunity...” – if it really is, then it will be much too risky for hard earned savings or pension money. “Once in a lifetime” is a clear signal of a risk that you need to quantify before parting with money.

Most things go in cycles and this includes scams and fashionable investments; be wary of being “railroaded” into something just because “everyone is doing it”. Is it really a good investment idea for you at this time, or merely fool’s gold in a pretty box?

How do I get professional advice?

If you would like to know more about how we can help you plan and realise your financial goals, please contact us at info@martin-redmanpartners.co.uk or call us on 01223 792 196.

Martin-Redman Partners are a team of experienced Financial Advisers who can advise on your personal or business financial arrangements. We have been building trusted relationships with clients for many years by articulating clear and tailored recommendations in areas ranging from investments to retirement planning, to complex estate planning advice.

The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.