15 June 2021

How to protect yourself against financial scams

How to protect yourself against financial scams

Technology has made it easier than ever for scammers to target victims, and the tactics they use are becoming ever more sophisticated. There are reports of fraudsters using social media adverts to reach a large audience, spoofing phone numbers to make it appear they’re calling from legitimate firms, and building websites that seem genuine. Even individuals that research firms before handing over their money can be duped out of their life’s savings.

It’s easy to think “I’ll never fall for a scam”, but it happens to thousands of people every year

Opportunistic scammers take advantage of vulnerable people and situations. Even if you’re financially savvy, a scammer can catch you at a vulnerable time and persuade you to part with your cash.

The pandemic in 2020 highlighted this. Between the March and July, over £11 million was lost to coronavirus-related scams alone, according to Action Fraud. Scammers used the confusion and worry of the pandemic, from taking orders for non-existent face masks to offering early pension access to those that had lost their job. It’s more important than ever to be vigilant about scams and seek support if you’re not sure about an opportunity.

Santander research found that 45% of Brits would willingly move their money to a “safe account” if told to by a supposed police officer or bank worker over the phone that their account had been compromised. This type of scam plays on your concerns that your account has already been targeted by fraudsters. It can mean you’re less likely to ask questions or carefully consider your options, especially if the criminals know personal details. Even when you do your research, it’s not always obvious the person you’re speaking to isn’t genuine. Criminals are experts at impersonating people, organisations and the police. They spend hours researching you for their scams, hoping you’ll let your guard down for just a moment. Stop and think. It could protect you and your money.

Follow UK Finance’s advice to protect yourself from scams. Always remember to:

  • Stop: Taking a moment to stop and think before parting with your money or information could keep you safe.
  • Challenge: Could it be fake? It’s ok to reject, refuse, or ignore requests. Only criminals will try to rush or panic you.
  • Protect: Contact your bank immediately if you think you’ve fallen for a scam and report it to Action Fraud

Why do people fall for scams?

There are many reasons people fall for a scam. In some cases, it’s because a criminal has caught you at a bad time. If your thoughts are elsewhere, you’re more likely to be taken in by a scam. But scammers also use a variety of tricks and tactics to encourage you to part with your money.

Among the tactics frequently deployed by criminals are:

  • Fostering a sense of familiarity

Successful scammers are often good salespeople, and will build up a rapport with victims and create a sense of familiarity. Building up a sense of trust can mean you part with information more easily, providing fraudsters with an opportunity to exploit you. They may also use legitimate company details to give you confidence from the outset. While you may want to be polite and helpful towards what appears to be a legitimate caller, or be interested in discussing opportunities when approached, it’s important to remember to keep sensitive information safe and always verify who you’re speaking to.

  • Playing on common fears

Money is one of the biggest sources of worry for people, and scammers play on this. For example, you may be concerned about how you’ll pay for the retirement lifestyle you want or what would  happen to loved ones if you passed away. By playing on common worries, fraudsters can push you into making decisions that may not be right for you or that you may need more time to think about first.

  • Motivating victims with time-sensitive offers

A common tactic used by investors is to provide pressure by offering time-sensitive or “once in a lifetime” offers. It can mean you may act, when otherwise you may not have, because you’re worried about missing out. In some cases, scammers have even sent couriers to a victim’s house so paperwork is signed before they’ve had a chance to weigh up their options. A genuine finance professional will understand why you will want to consider the opportunity before moving forward.

Protecting your pension and retirement

Your pension is likely to be one of the largest assets you own. Yet, unless you’re retired, pensions are assets that can be easily forgotten about or overlooked. How pensions are accessed changed in 2015. Retirees now have far more freedom to create the retirement income and lifestyle they want. But increased pension flexibility also means they’re more attractive to fraudsters.

Understanding how your pension works and what your options are can reduce the risk of falling for a pension scam. A pension is a product you save into during your working life to pay for the lifestyle you want in retirement. Usually, the money is invested, helping it to grow over the long term. You can normally access a defined contribution pension from the age of 55, rising to 57 in 2028. You don’t have to access your retirement savings when you reach 55, you can leave it in your pension, where it will remain invested. When you decide to start taking an income, you have three main options:

  1. Withdraw lump sums:

This option allows you to take chunks of cash when you need it. The money you don’t withdraw will usually remain invested, and 25% of each amount you take out is tax-free.

  1. Take an adjustable income:

An adjustable income means you control how much you receive, and can change the amount to reflect your needs. You can take up to 25% of your pension tax-free, the rest will remain invested until you withdraw it and will be classed as a taxable income.

  1. Purchase an annuity:

An annuity is a product you purchase with your retirement savings, providing a guaranteed income for life or a fixed number of years. You can take up to 25% of your pension tax-free before purchasing an annuity. You don’t have to pick just one option – you can mix them up. Having a clear retirement plan you’re confident in can help you avoid a pension scam, should you be targeted.

If it sounds too good to be true, it probably is!

If you’re contacted by someone you don’t know who asks for personal details, asking these questions can help identify fraud:

  1. Is the phone call or offer unsolicited? Was it expected, or out of the blue?
  2. Are they asking to confirm sensitive details such as your name, address or bank account details?
  3. Are they looking for a fast/instant response of some kind?
  4. Are they asking for money?
  5. Is the caller avoiding using the actual name of your bank or utilities company?
  6. Are they offering a prize, free gift or trial?
  7. If they say they are the police investigating something, do not give away sensitive information.
  8. Does an email for your bank of another company have an odd email address?
  9. Is the formatting strange or are there spelling mistakes?
  10. Are you being asked to change your password despite not being sent a request to do so?

We’re here to lend support and provide you with information too. If you’ve been approached and you’re not sure if it’s a scam, please give us a call. If you would like a copy of our full “Guide to Scams” (which this blog is based on), please email info@beckettsfs.co.uk to request a copy. We’re happy to help you assess opportunities and discuss how they can fit into your wider financial plan. It’s a step that could help you avoid a scam.