Don’t get spooked by a financial scam this Halloween

Never mind the ghosts, ghouls, or phantoms on the prowl this Halloween, far better you keep a watch out for spectral scammers trying to help themselves to your bank account or plunder your pension.

In the first half of this year, fraudsters have already stolen £580 million from unwitting victims, according to UK Finance. But it’s not just money that victims lose – falling prey to a manipulative scammer can cause psychological damage, impacting your self-esteem, trust and sense of security, and wreaking havoc on your mental health.

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The interactive investor Great British Retirement Survey 2023, which gathered the views of more than 9,000 savers, found one in 12 (8%) of respondents had lost money to a financial scam in the past three years.

And scammers don’t just target “the vulnerable” – nobody is immune. The ii survey found younger people were more likely to be victims, with 15% of under 40s losing money over the same period. Fraudsters are often most successful when we are busy, distracted or stressed.

So, what can you do to protect yourself?

Scams constantly evolve and it’s impossible to be aware of every one that’s doing the rounds, but by finding out how they work and what they look like, it becomes a lot easier to tell the tricks from the treats.

Here are two common types of financial scam and some tips on how to stay safe.

Pension and investment scams

Every year thousands of innocent people are caught out by pension and investment scams, on the false belief that they will make a lot of money, fast.

Research from Nationwide has revealed that 36% of scams reported to the building society involve investing, with an average loss of £5,000. Young investors, under the age of 34, account for 16% of cases, while 25% were 65 or older.

More worrying still was the impact the promise of money has on our decision-making – 24% said they would take more risks for better returns and a staggering 61% said they would agree to an investment if it could double their money. Fear of missing out, or FOMO, means 8% will invest immediately, without doing any research.

Investment scams often involve you being contacted with an investment opportunity that looks too good to ignore. The catch is that the investment will normally be worthless, if it exists at all.  

There’s a lot of overlap with pension scams too. Here, you might be contacted with the offer of a free pension review, a no-obligation consultation, or told you can get access to your pension before the age of 55. You might be told about “government initiatives” or “legal loopholes” that you can cash in on. Once they’ve got you, they’re likely to encourage you to transfer your pension and invest it elsewhere – but again the investment is likely to be a con.

Pensions are rich pickings for scammers, with the Financial Conduct Authority (FCA) reporting an average loss of £75,000 per victim.

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Investment and pension scams can be tricky to spot. “Advisers” might be friendly and knowledgeable and will often have a slick and professional website, but there are still plenty of red flags, if you know what to look out for. 

You should be suspicious if your “adviser” won’t give you a phone number to call back on, or is hurrying you into making a decision. Also be wary about low-risk investments that guarantee high returns - they simply don’t exist.

Another important point is that, since January 2019, it is illegal for pensions firms to cold-call you, so if you’re contacted out the blue, the alarm bells should ring straightaway. That legislation doesn’t currently cover investments, but the government is in the process of consulting on how to extend it to cover all financial products.

But even that legislation isn’t failsafe. There are now scammers using “official-looking” websites to capture your contact details and get around the cold-call ban.

This means it’s important that you never drop your guard. But thankfully, if you are considering an investment or pension opportunity, there are plenty of ways to check whether it’s a real deal or a scam.

Stay safe: before making an investment or transferring a pension, check whether the business is regulated by the FCA. The regulator also has a warning list of unauthorised firms that it’s aware of. The FCA’s Scam Smart website can also help you work out whether an investment is legitimate or a scam.

Impersonation fraud

This is perhaps the most malicious type of fraud, where you are contacted by a fraudster that is pretending to be someone else – a family member, business (such as a clone pension or investment firm) or government organisation. They will either want a payment from you, or to access personal information which they use to steal your identity.

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One common example is a text or email purporting to be from your child or another family member, requesting money in an emergency.  Another particularly callous one is conveyancing fraud, where criminals trick homebuyers into paying their house deposit to them, rather than their solicitor. Fraudsters typically do this by hacking into solicitors’ email systems and sending buyers fake messages requesting payments. This has been dubbed “Friday Afternoon Fraud” – rushed through at the end of the week, buyers only become aware that they have paid their house deposit into the wrong account when they talk to their solicitor the following Monday, by which point the money is long gone.

Stay safe: if you have been asked to make a payment to a person or business, call them using the number you regularly use to confirm the bank details are correct. Be wary of communications from “new” members of staff and check for spelling and grammatical errors in emails. For large payments, consider going into a bank branch to carry out the transaction.

Will my bank pay me back if I am scammed?

This is a contentious point and unfortunately there aren’t any black and white answers. If money has been stolen from you – and you haven’t been negligent – your bank should refund you the money. However, it’s more complicated if you authorised the payment yourself. In these cases, it may repay the money if it thinks you are an innocent victim of a crime, but there are no guarantees.

Whatever the likely outcome, it’s important you don’t let embarrassment stop you reporting what’s happened to your bank. You should also report it to Action Fraud, the national reporting centre for fraud and cyber-crime. Even if you don’t get your money back, your actions might help prevent more people becoming victims.