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Financial fright night: How to avoid investment scams

11 July, 2017

Watch out for finance fraud horror this Halloween. We're arming you to deal with fraudsters on the phone, tax haven honeytraps, and cryptocurrency up in smoke. Reader beware, your wallet's in for a scare...

Chances are that the only things you’ll be frightened by this Halloween are a few kids high on e-numbers complaining about your choice of Haribos. Losing your money and spending your old age having to choose between food or heating your home? Now that’s real-life scary. So here are some common scams and scares to watch out for so your money survives the night (and beyond).

Curse of the cold caller

Yes, we sound like a stuck record, but plenty of people are still falling for cold callers. Records from the UK regulator, the FCA, found that around one in every 500 calls end with people sending money to fraudsters – an eye-popping 250 people every day. Investment fraud is particularly pernicious, with Action Fraud ( reporting an average loss of £32,000.

So we’ll repeat ourselves: no legitimate financial institution calls you over the phone and encourages you to part with your money. They don’t have to. If someone calls you asking about your pension arrangements, tell them it sounds like a lovely idea, but your son/daughter/friend works for the FCA/Fraud squad/Daily Mail personal finance section and you’d just like to run it past them – would that be OK? I’m betting you won’t seem them for dust.

These guys will always try and give you a deadline. “If you don’t make the transfer today this huge great opportunity will go up in a puff of smoke.” In reality, no proper financial product has a time limit. Avoid, avoid, avoid.

‘Too good to be true’ tax avoidance schemes

In April this year, around 130 top premiership footballers faced a £250 million bill over their investments in a film project. The project had been designed to avoid tax, but many ended up with huge fines as a result. A number faced bankruptcy, having taken out loans to invest in the scheme.

HMRC is not manned by fools. When it comes to mitigating tax (, you’ve got ISAs (, pensions (, VCTs and that’s about it. Anything else is straying into dangerous territory. If Cristiano Ronaldo can fall foul of the tax authorities, so can you.

Rise and fall of the quick buck

Cryptocurrencies, niche technology shares, that mining company that’s just struck gold… a few people make money, but pretty much everyone else loses a lot. They’re not scams, they’re just a potentially dumb (and certainly very risky) way to invest. Fine if you fancy a bit of a punt, but you wouldn’t put your entire pension on the 3.40 at Haydock Park, so don’t put it on these either.

Of particular note are those areas where you can lose more than your initial investment. Lots of online sites offer contracts for differences, but if these go against you, you could end up losing lots of money; even your house.

If someone says this, leg it…

The Pensions Regulator has identified the most common tactics used by pension scammers ( to trick savers out of their savings. This is what you need to be afraid of:

  • A cold call, text message, website pop-up or someone coming to the door offering a ‘free pension review’, ‘one-off investment opportunity’ or ‘legal loophole’.

  • Convincing marketing materials that promise returns of over 8% on an investment. With long-term government bonds paying 2-3% and the dividend income from the stock market at around 4%, anything that promises substantially higher returns is likely to be high risk.

  • Paperwork delivered to your door by courier that requires immediate signature. No-one should be hurried into making any decision involving something as important as their pensions savings.

  • A proposal to put money in a single investment. In most circumstances, financial advisers will suggest diversification of assets.

  • Claims that pension assets can be accessed before age 55. Aside from in a few very specific circumstances, they can’t, without whopping tax implications.

  • Transfers of money overseas.

No matter what you do, before you say yes to a new financial opportunity you should do your homework. Look at what existing customers say about a company, make sure they’re registered with the FCA (, and check Scamwatch ( These should provide the silver bullets you need to keep the financial werewolves at bay.