A New Year's resolution: be ‘Scam Smart'!


Covid-19 update: The onset of the coronavirus pandemic within the UK has sadly witnessed a surge in financial scams that are targeted at the elderly and vulnerable.  This Blog focuses on what the Regulators are doing to try and minimise the number of scam victims.

Estimated reading time: 3 minutes

Two years on from the government’s announcement that it intended to ban pensions cold-calling in order to end the appropriation of millions of pounds of people’s pension funds by scammers, the regulations introducing the ban have finally been approved by Parliament, and took effect from 9 January 2019.

The day after the ban was approved, The Pensions Regulator (TPR) announced an investigation into a suspected pension fraud, where 370 people were persuaded to transfer around £18 million into eight different ‘sham’ pension arrangements.

Although the cold-calling ban is welcome, albeit long overdue, it only serves to criminalise the promotion of scams, rather than the scams themselves. The benefit of this, however, is that it provides a means of pursuing and punishing unregulated introducers who are a step removed from the scam itself; that is, those who promote it, without technically being involved in its creation. What it also means though, is that it remains incumbent on us all to stay alert and recognise the typical symptoms that constitute a scam.

"In August 2018, TPR and the Financial Conduct Authority (FCA) joined forces to launch a “ScamSmart” media campaign, which sets out to warn savers about unsolicited pension communications, and includes adverts about the dangers of falling victim to a scam by contrasting the lives of victims and scammers."

ScamSmart is more than just an advertising campaign, it helps people to identify whether they may be at the receiving end of a potential scam. One of the tactics of scammers is to work (or weasel) their way into people’s trust and then sow distrust in their minds about the very people who will try to protect them, such as their current pension provider. ScamSmart is the product of two regulators and so could be regarded as a trusted source.

Pleasingly, the number of people seeking information about pension scams has increased five-fold since the launch of the campaign, from an average of 562 people a day before launch, to an average of 3,145 a day in the first 55 days following the launch (Source: TPR and FCA – 4 December 2018).

You can visit the ScamSmart site here and may want to add it to your ‘favourites’ for ease of future reference.

The website itself isn’t just an awareness piece regarding scams, but also contains functions that allow consumers to receive hints and tips based on their actual circumstances, as well as a facility to look known scams up; see here for example.

But for those who have fallen victim to a scam, what recourse is available? 

The first thing to do is to report the crime to Action Fraud on 0300 123 2040 or online via their website. Sadly, experience has taught us that scammed individuals very rarely get their funds back, which makes it even more important to think very carefully before pursuing any investment that ‘sounds too good to be true’.

There may also be the possibility of receiving compensation for the scam, which is where the Financial Services Compensation Scheme (FSCS) comes in.

But don’t think that receiving compensation is automatic, or that every penny that has been lost will be compensated for. There are limits on the ultimate amount of compensation payable, depending upon the type of institution, savings arrangement or investment involved, and these are set out on the FSCS website. Even if you are compensated, it is likely to be a distressing experience and there will be a period during which you are out of pocket, and this may cause you financial hardship.

Although this purported ‘safety net’ sounds attractive in principle, we have previously written at length about the dysfunctionality of the FSCS (see further reading below), which has effectively become a means of passing money (in the form of industry levies) from the responsible and honest, to a mixed group that ranges from victims of crime to the reckless and greedy.  Instead, our financial regulators and other agencies need to actively pursue irresponsible and criminal financial activity, in an attempt to recover the proceeds of crime and return the funds back to their rightful owners

"Although compensation may be (understandably) perceived as good news to consumers, and levies as something rather remote and abstract, the money to fund those levies is ultimately derived from them, in the form of increased charges and fees."

As with the pensions cold-calling ban, the absence of unlimited compensation reinforces the need to avoid being scammed in the first place, and ensure that your pension investments are placed with a trusted and financially strong provider, who is in business for the long-term.

Why not make being ‘Scam Smart’ one of your New Year’s resolutions for 2019?