The following is a transcript of a bonus episode of The Pension Confident Podcast - How to avoid financial scams. You can listen to this bonus episode or scroll on to read the conversation.
PHILIPPA: Hello, and welcome to another bonus episode of The Pension Confident Podcast. This week, Citizens Advice are running a Scams Awareness Campaign. So what better time to revisit one of our most important episodes full of top tips and need-to-know tips to help you steer well clear of financial scams.
According to research by UK Finance, £1.17 billion was stolen through fraud last year. A strong reminder that we always need to be on our guard. But what are the red flags we all need to watch for when it comes to our finances?
Well, back in episode seven, I chatted with Michelle Cracknell CBE. She’s the Former Chief Executive of The Pensions Advisory Service and an Independent Non-Executive Director at PensionBee. Lisa Markey was with us, too. She’s the Former Head of Security and Counter Fraud at Open Banking. And so was PensionBee’s CTO, Jonathan Lister Parsons.
We talked about everything from the huge variety of financial scams to the warning signs to look out for, and importantly, what you should do if you think you’ve been scammed. Today, we’re sharing the best bits, so listen up and find out how to keep your money safe and sound.
Before we start, just a reminder that anything discussed on the podcast shouldn’t be regarded as financial or legal advice, and when investing, your capital is at risk.
OK, let’s get into it. I’m guessing chances are we have all, sitting around this table, been targeted by fraudsters at some point. Have any of you ever actually fallen victim to a financial scam?
MICHELLE: I was a victim to one of those people that hang around on the street and say they’ve got one last offer and they’re just about to go home for the day and they’re doing this amazing discount from £150 to £75 if I just gave them my credit card details. I did fall for that.
PHILIPPA: Did you?
MICHELLE: To this day, I’m embarrassed that I did fall for it. I did eventually unwind it, but it took a lot of perseverance. But it was just that moment he got me with a product that I was quite interested in at the right time, and I was slightly time-pushed, and I didn’t give it enough thought.
PHILIPPA: That’s often the way, isn’t it? They grab you just at the moment when you’re jumping on a train or in a rush, and before you know it, you’ve fallen for it.
MICHELLE: Exactly right. You think, yes, maybe they’re right. Maybe this is an offer that I can’t refuse.
PHILIPPA: Lisa, you’re a security expert. Have you ever fallen victim?
LISA: I actually haven’t, but these things are so clever that sometimes I’ll see something and I’ll literally send it to my tech guys to unravel and tell me, “is this one OK?”.
PHILIPPA: Yeah. Jonathan?
JONATHAN: Well, I can’t pass up the opportunity to talk to you about an experience that my brother had recently. He crossed the Dartford Crossing.
PHILIPPA: The bridge?
JONATHAN: The bridge. Where you have to pay a small toll. He got a text message saying, “you’ve crossed the Dartford Crossing, please pay this £4” - or £6, whatever it was. He’d done that, and it was to his phone, so he clicked on the link and went through the process paying no attention to what the website looked like.
PHILIPPA: Sure. Well, you’d, wouldn’t you?
JONATHAN: Why would you think it was anything other than real? Then within 24 hours, he got a phone call from the real Dartford Crossing people saying, “you haven’t paid your toll. Can you pay your toll now, please?”. That really amazes me because to have somebody’s telephone number and know that they’d crossed the bridge, that’s a strange combination. You’ve really got to have done a lot of work.
PHILIPPA: Before we can identify a scam and work out what to do, obviously, we need to have some sense of what a financial scam might be. So Lisa, give us an idea of what thing we’re talking about when we talk about financial scam?
LISA: It’s very broad-based, but at the end of the day, at some point, there’s a money transfer. I think what you experienced, Jonathan, might have been a drive-by, somebody sitting close by with something scanning. I’d like to know how that works. That’s a new one for me. The fact that it’s a new one for me just shows they’re so numerous.
PHILIPPA: I think we’re all familiar with the idea of maybe being scammed by a text or an SMS or an email. But there’s purchase scams, too, aren’t there? Where you buy something online…
LISA: When you’re buying something online, I think it’s not necessarily the item that you’re buying, but the methods. Always look for ‘HTTPS’, which is the secure version, to make sure that your data is encrypted. There are a lot of accreditation schemes out there, like Trustpilot, that [sort of] thing. If you see a blank, bare website, then that’s a cause for concern. I’m always wary - I know people use it all the time - but I’m wary of eBay. And, you know, tickets. I’d be very, very wary of buying tickets online. I’d say that clicking on links versus just writing in the web address you want to go to. Let you be in charge. Don’t reply if somebody sends you an email, don’t expect that that’s a real email address. Give the person a call.
PHILIPPA: It’s an impersonation scam, isn’t it? Because they can be online. Old-fashioned scams, someone on your doorstep, it still happens, doesn’t it?
LISA: It does. It absolutely still happens, and especially with vulnerable people.
PHILIPPA: Well, yeah, exactly. I was going to ask you about that, Michelle, because are there some sorts of people who’re more likely to become victims than others? Can you profile ‘likely victims’?
MICHELLE: Well, I think there’s quite a common myth that scams affect vulnerable people. And certainly, there are some terrible stories of people that are lonely and therefore are pulled into certain scams. But in the pensions area, certainly the experience that I’ve had is that, actually, level of knowledge and financial expertise isn’t a barrier. In fact, in a way, because the individual is always looking to improve on the investment performance or some other angle of their pension scheme, then they’re prime people to be targeted.
In fact, just an anecdote from me is that when I was Head of the Pensions Advisory Service, I was blogging about pensions all of the time. I was getting scams about three or four times a day because my social media profile was picking up that I was talking about pensions. They were thinking, ‘she must have pensions, and she must be obsessed with pensions’, which I am!
JONATHAN: The other thing that really scares me about these reviews is if you’re trusting the person who’s giving that review to you, you’re going to disclose who knows how much personal information and financial information. That particular experience doesn’t need to directly lead to a pension scam because they’re going to find out all about your assets, they might find out about your accounts. If somebody you thought was a financial adviser gave you a form and said, “please fill in your account details”, people will.
PHILIPPA: You might do, mightn’t you?
MICHELLE: A lot of the people that are phoning up and contacting you over the pension’s review are the same people that were contacting you over PPI (payment protection insurance) reviews, easyJet, plain refunds. It’s the same people that are doing that.
JONATHAN: Also, just from the pension side, I think something which is sad and tragic - but true - is that a lot of fraud comes from within the family. That’s something that we see. People who’re trying to act on an impulse to maybe access the money that they think that they’re due, that situation where maybe the family relationship has broken down, and they have all of the personal information of the legitimate customer. I think that’s a real problem, and that’s very, very hard to put walls in front of.
PHILIPPA: That’s a very depressing thought, isn’t it? Michelle, as we said earlier, pensions, it’s a particularly vulnerable area because the numbers are so big. It’s a huge pot of cash for most people. Presumably, that is why it’s particularly attractive to fraudsters. But are there any specific pension-related scams that we should be looking out for?
MICHELLE: Yes, I think there are. It’s a large pot of money, and it’s also an asset that you, in most instances, didn’t set up yourself. It was set up for you by your employer. So your level of understanding of what you’ve got and how it works is incredibly low in a lot of instances. And that makes it a very, very attractive target - big pot of money, low levels of understanding. And the scams that I’ve certainly seen in my career have mainly been associated with investments. I think, again, people don’t really understand that their pension is invested. And if they do know it’s invested, they don’t really know how you pick a good fund to be in and where to go.
So when somebody makes an offer such as “you can invest your pension fund in a truffle farm in France, shares in a hotel or in a car park” for an individual on the street, that seems like a very legitimate investment because it’s bricks and mortar. Some of the red flags in the pension scams are where they’re promising, and quite often they use the word ‘guaranteeing’ investment returns of in excess of 8%, 9%, 10%.
PHILIPPA: Completely unrealistic, in reality, but tempting. Pension release, pension liberation. Jonathan, you mentioned that it’s 55. You should be aware of any scheme that says, “oh, you can have that money before 55“.
JONATHAN: Absolutely. That’s a big no-no. There’s a lot of tax to pay if you accidentally take money out of your pension.
PHILIPPA: But people don’t know this, do they?
MICHELLE: Absolutely. Yes, we all know that because we work in the pensions industry or the financial industry. I’ve seen less of that at the moment, and quite often now, a lot of people are saying, “take your money out at the age of 55 from this pension fund that you don’t really understand and invest it in some other vehicle”. Quite often offshore or quite often unprotected, so that you’ve got no compensation if it goes wrong, so that if the shares and the company goes bust, you get nothing back. And actually, if you went to court, they’re not illegal, they’re just very bad for you.
PHILIPPA: It’s a terrible thought. So that’s pension liberation, pension release. We’ve talked about pension reviews, people phoning you up, contacting you, saying, “you could have a better pension than this”. Annuity scams, how do they work?
MICHELLE: The scams I’ve seen related to annuity have been playing on people’s thoughts that annuities are of poor value, and “what happens if I die, I’ll get nothing back”. Most people say, “well, how can I avoid having an annuity?”. People will then try and say, “well, here’s an alternative where if you give me all your money, we’ll pay you an income which is better and higher, and therefore you’re not trapped in, and we’ll also, if you did die, we’ll give your money back”. So they’re touching on all of the issues that people don’t like about annuities. But the one thing that they’re doing that is exactly the same as annuity is they’re getting all of your money in one go.
PHILIPPA: Up front?
MICHELLE: Up front, yes.
PHILIPPA: Make me feel better! Tell me, how do I spot these things? Are there particular red flags I should be watching out for?
JONATHAN: I don’t know if I can make you feel better, but for me, scams are one of three things. They’re either too good to be true, too quick, or too weird. So returns that are ‘too good to be true’ - they ‘solve all your money problems’. Something about it just seems wrong. There’s a lot of those sorts of scams.
Then with the speed, you’ve got either the pressure to “act now or this deal will be off the table”, or like you said, the world will come crashing down, or they don’t do enough due diligence. So they’re being really, really fast about things. They’re not bothered about whether you submit scans of your passports. They just want your account details. They want you to send them the money.
Then ‘too weird’ is those esoteric investments that we were talking about, or maybe there’s something about it, like you have to pay the funds over through a strange payment channel or move it into crypto, for example.
MICHELLE: One of the signals that we used to hear from people who phoned us at The Pensions Advisory Service (now the Money and Pensions Service), the individuals used to come round to pick up - you know, “you don’t have to worry about photocopying your passport, we’ll come and pick it up and we can take the photograph for you”. There was this one gentleman, I remember vividly, who phoned us up and said, “I’m phoning from the kitchen because he’s still in the living room”.
PHILIPPA: The checklist of things we’re thinking about is don’t be rushed or pressured into making a decision, reject unexpected offers, cold calling, any of those things. Shall we take a quick look at what to do if the worst happens and you do fall victim to a scam? What can you do?
MICHELLE: If you’re still in the process of the transaction - stop. Just to stop what you’re doing. Also, notify, for example, if you’re transferring from one pension fund to another pension fund, notify the original pension scheme. The second thing is to phone Action Fraud, and they’ll ask for the details. They’ve got specific details relative to pensions, which they’ll ask you for.
PHILIPPA: And they’re the national reporting organisation?
MICHELLE: They are. I’m afraid to say that definitely in the case of pension scams, the probability… They’ll give you a crime number, but the probability of you getting your money back is incredibly slow.
PHILIPPA: Lisa, what do you reckon?
LISA: Moving on further towards the rest of the financial services industry, it depends on the nature of what’s happened. But with other transactions, you can get the money back sometimes, as long as you do contact the organisation quickly enough. That’s absolutely of the essence.
PHILIPPA: Good tips, weren’t they? All really valuable things to know to help you keep yourself safe from fraud. And talking about staying safe, stay tuned because next time we’ll be talking about financial abuse. How to spot the warning signs, and what to do if you or someone close to you is in that situation.
Just before we go, a last reminder - anything discussed on the podcast shouldn’t be regarded as financial or legal advice and when investing your capital is at risk.
Stay on top of all your personal finance questions by subscribing to The Pension Confident Podcast on any podcast app or on YouTube, and in the PensionBe app too. Give us a rate and a review while you’re there. We’d love to know what you think about our series and to hear your suggestions for topics you’d like us to cover. Thanks for listening.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
