FCA issues pension scam advice as average losses double

7 July 2021

The Financial Conduct Authority (FCA) has urged pension savers to exercise caution after more than £2 million has already been lost to pension scams in 2021.

A total of £2,241,774 was reportedly lost to scams between January and May 2021, with the regulator warning that savers are nine times more likely to accept pensions advice from someone online than a stranger met in person.

The average loss was £50,949 according to complaints filed with Action Fraud, more than double last year’s average (£23,689).

Scammers targeted pension pots big and small, with reported losses ranging from £1,000 to as much £500,000.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Imagine a stranger in a pub offering free pension advice and then telling you to put those savings into something they were selling. It is difficult imagining anyone saying yes to that.

“It’s no different online. Whether you’re on social media or checking your emails, if someone offers you free pension advice, ‘flip the context’ and imagine them doing the same thing in real life. Stop and think how you would react.”

“Fraudsters will seek out every opportunity to exploit innocent people, no matter how much they have saved.” – Mark Steward, FCA

The research revealed that more than a quarter (28%) of pension holders felt more at risk of a pension scam now compared to before the Covid-19 pandemic, and of those who felt more at risk nearly two thirds (65%) felt that scammer tactics had become more sophisticated and harder to spot during the pandemic.

As a result, the FCA has urged pension savers to ‘flip the context’ and imagine what they would do if they received pension advice from a stranger while in the pub or out shopping with friends.

Research showed that half (50%) of pension holders would be unlikely to make an ‘impulse buy’ in a shop, but more than a third (36%) were unable to recognise time-limited offers as a sign of a pension scam.

Despite more than two thirds (68%) of pension holders feeling confident they could spot the signs of a pension scam, the research found that only around a quarter (28%) realised that a free pension review was a sign of a scam and just 40% knew to be wary of opportunities to transfer their pension.

Jon Greer, head of retirement policy at Quilter, said: “Most of us are hardwired to ignore the ‘get rich quick’ schemes we hear about in the pub and we know to take any unsolicited face-to-face financial propositions with a pinch of salt. Yet, when we go online, we are often lulled into a false sense of security and our instincts can go out the window.

“The FCA’s research suggests that all too often, people incorrectly assume they can trust what they see online to be genuine.

“That’s why the FCA’s ScamSmart campaign is vital. Awareness is one of the most powerful weapons against scammers. Consumers need to be aware of the latest tactics used by scammers, and they need to be aware of the steps they can take to keep themselves safe and protect their hard-earned savings.

“Spotting a pension scam can be tricky and it is absolutely critical for savers to have their guard up when approached with an offer to transfer into unusual assets promising outlandish returns or take advantage of a scheme offering early access.”

Greer said awareness alone, however, will not solve the issue. Greer called for the government to add fraudulent online advertising to the Online Safety Bill so that technology companies face legal requirements to tackle the scams that appear on their site.

Tom Selby, senior analyst at AJ Bell, said: “It is shocking that £2 million has been lost to pension scams so far this year but in reality this is the tip of the iceberg.

“We also know that the Coronavirus pandemic has led to an increase in vulnerability. Depressing as it is, scammers prey on this vulnerability to try to fleece people out of their hard-earned retirement savings.

“While steps have been taken to protect pension savers, Government and regulatory interventions can only do so much. It is vital individuals take responsibility, be careful before parting with their money and take the time to know the tell-tale signs of a scam.”

Selby added: “While the Government is under huge pressure from campaigners to include online advertising in the Online Safety Bill, at this stage there is no guarantee this will happen.

“Even if it does, it’s inevitable scammers will evolve their tactics to attempt to dodge any new checks that are introduced.

“The FCA’s message to savers to ‘flip the context’ when they receive an online offer is absolutely right. People need to treat any unsolicited approach about their finances – be it in person or online – with a healthy dose of scepticism.”

Anthony Rafferty, CEO of the FinTech Origo added that protection was not just a matter for individuals; increasingly it will be expected that firms have common sense security measures in place.

“Cybercrime is a growing business and cybercriminals are becoming ever more adept at it. Individuals will want to see that the companies with which they deal have in place technology and security protocols to help protect their financial security.

“This will include fundamental elements like secure communications. Consumers will expect that they can communicate securely with their product or service provider, especially in respect of financial transactions and private and confidential information. They will also expect firms to have in place security protocols to flag suspicious activity and help prevent criminal actions.

“We believe the ever-increasing pressure from cybercriminal activity will see all financial services firms seek to reduce risk to their business and their reputation through a robust defensive strategy, including use of encrypted email, as a matter of business hygiene.”

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