A new breed of 'exotic' pension scams is even catching experienced investors out, the financial regulator says.
The Financial Conduct Authority (FCA) told MPs that fraudsters see the new pension freedoms as a great opportunity to scam people, particularly those who feel a little more confident about financial matters.
Chris Woolard, director of policy risk and research at the FCA, told the Work and Pensions Select Committee that 10,000 people had reported scam attempts since the new rules came into effect. He did point out that not all of these incidents pertained to real scams, but said it was good that many were cautious about questionable-looking investments.
Mr Woolard said it was a “constant struggle” against fraudsters, as every time a particular scam is cracked down on, another rises to take its place. He said that in light of the new pension freedoms, criminals who had previously operated other scams were now likely to be targeting pension pots.
He said that the level of overall scamming activity has remained roughly the same since the introduction of the pension reforms, with the average amount lost by fooled investors was between £18,000 and £20,000.
Who falls for scams?
When asked by the committee to identify who is most likely to fall for scams, he said: “The person who is most vulnerable is often the most confident person.”
“We tend to find that people who have had some former experience of investing in the stock market, who think they know what they’re doing… [and] who have a significant range of resources available to them – which might be a mixture of pension pots and other investments – are far more likely to have the confidence to invest in something that sounds a bit ‘exotic’.”
He said that people with less money were more likely to be cautious as to what they did with it. These people may also be less attractive to scammers in the first place, as they have less money to steal.