Interactive Investor

Financial scam ‘weak spots’ for men and women

26th January 2021 12:04

Myron Jobson from interactive investor

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interactive investor research finds notable gender differences when it comes to susceptibility to scams.

Tackling the scourge of financial scams continues to be high up the agenda for the Financial Conduct Authority, which is set to publish work on clone firm investment scams as part of its ScamSmart campaign on Wednesday (27 January 2021).

interactive investor’s most recent Great British Retirement Survey 2020 of more than 12,000 UK adults, revealed notable gender differences when it comes to the susceptibility of financial scams.

Some 13% of respondents have fallen victim to financial scams, rising to 18% in the 72-77 age category, and 20% amongst those aged over 77.

Women are less likely to have experienced a financial scam than men (9% versus 15%), and over a third of men (35%) admitted to having been the victim of investment fraud, compared to 22% of women. However, when it comes to current account fraud, more women said they had fallen victim (27% versus 21%).

In addition, while 42% of women and 43% of men said they got their money back, 17% of women said it had put them off attempting to put their financial affairs in order, for fear of being scammed again, compared to 9% among men.

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Financial scams tend to be indiscriminate in their targeting, and while we all have to be on our guard, the risks seem to increase with age. There’s some gender differences, too. Men might be more susceptible to investment fraud because, on average at least, they tend to invest more. Whatever the reason, it is important to take care with your money and look out for the warning signs.

“The City watchdog reports that it received over 24,000 reports of unauthorised activity and published over 1,000 consumer alerts in 2020 – an 82% increase on the previous year, illustrating that the Covid-19 pandemic created a perfect storm for unscrupulous individuals. With the Covid crisis still ongoing, the worry is the internal alarm bells warning people of ‘too good to be true’ money making opportunities is increasingly becoming muted among those who have suffered a loss of income out of desperation.

“The FCA has also had its sights on misleading advertising of high-risk investment products. The regulator quite rightly banned the mass marketing of mini bonds to retail investors, and more recently, issued a warning over the risks of investments advertising high returns based on cryptoassets like Bitcoin.

“The allure of these high-risk products is compounded by the low interest rate environment which has wreaked havoc on saving rates. But the high-risk nature of these products is not something that is easily understood.”

Myron’s tip to avoid financial scams

Look out for the tell-tale scam signs

Cold-calling relating to pensions has been banned since 2019, but that still doesn’t stop unscrupulous individuals from using this method to scam people out of their cash. No reputable pensions firm would call you out of the blue to suggest you transfer your retirement nest egg to a better deal. When in doubt, simply hang up.

Also beware of things that signal illegitimacy. If the firm doesn’t allow you to call back, it is most likely because it is a fraudulent enterprise. Also beware of firms that only list mobile phone numbers or a PO box address on their website.

Fraudsters may try to tempt you in by offering free pension reviews. Don’t fall for it. It could be a trick to get you to share personal information.

If it sounds too good to be true, it usually is

There is no such thing as a free lunch when it comes to your finances. If you come across a proposition that promises ridiculous returns and downplays risk, it probably is too good to be true.

Before you commit to any offers, make sure you do extensive independent research on the company and make sure you check all the information yourself – don’t just take their word for it. There are no shortcuts when it comes to financial management, but help is available. The government’s free and impartial pension wise service is a good first port of call, offering guidance on options for those with a defined contribution pension.

Carry out due diligence

Be suspicious of any unsolicited correspondence. Why take the risk? Have a look at the FCA’s ScamSmart website to see if the offer is a known scam. You should only deal with financial services firms that have been authorised by the city watchdog.

If you deal with an unauthorised firm, you will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme safety net if things go wrong.

Beware of offers to unlock your pension before age 55

Schemes that offer to unlock your pension before age 55 should be avoided at all cost.  These schemes, also known as pension liberation and pension loans, are trying to get you to break the law and are likely to result in you paying huge administration costs and big tax bills, in some cases leaving people with no savings for retirement.

Only in very rare case, such as very poor health, is early access to pension possible.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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