Fraudsters are increasingly targeting the over 55s, in an effort to get their greedy hands on their pension savings. In order to trap retirees more effectively, they employ specific tactics that they know work better on them. The Financial Conduct Authority has revealed details of the tactics in order to help savers spot when they are being taken for a ride.
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Nick Hewer, who is supporting the campaign, says: "As someone who has been approached by scammers myself, I know how hard it is to identify whether an investment offer is legitimate. They're very clever these people, playing psychological games to win over the trust of often vulnerable victims."
There are several tactics that play on the specific psychology of older investors.
1. 'Act fast'
FCA research found that 53% of people over the age of 55 believe that acting quickly can be the key to getting a good deal. Unfortunately, the fraudsters know this, so one approach they use is put people under pressure to make a decision quickly about a time-limited investment.
2. 'Keep quiet'
A third of older people say it's best not to discuss investment decisions with other people, and just 48% said they would seek financial advice. The scammers play on this desire for privacy, and emphasise that the deal needs to remain secret. Unfortunately, this stops victims from speaking to others who may be able to dissuade them from making a poor investment.
3. 'Everyone else is taking advantage'
Some 45% of people aged over 55 agree that investment opportunities are more attractive if you know other people who have made a similar investment (this is known as social proof). Scammers will exploit this by talking of other retirees who have made a fortune - and several others who want in on the deal.
4. 'I know what I'm doing'
Older investors have spent years gaining experience of savings and investments, and are rightly proud of all they have learned. Scammers will take advantage of this, and use flattery to their benefit. They will continually praise their victims for their investment skills - in an effort to build their confidence enough to make an investment.
5. 'I deserve a decent return'
Older people, who have spent years building a pension pot, have also seen the returns available from savings dwindle to almost nothing. Their view of the returns they ought to be able to get from low-risk investments is rooted in a time when savings received 5% interest or more. It means they are susceptible when scammers offer them lucrative returns above the market rate, and downplay the risks of the investment.
To protect yourself, the FCA says that at the very least, you should reject any unsolicited contact about investments.
If you are considering an investment with a firm you believe is reputable, you should check the FCA register and the FCA Warning List to make sure.
Ideally, it's also a very good idea to take impartial advice. You will need to pay for advice, but if it can help you avoid the scammers and make the very most of your pension investments, then it may well be worth the money.
As Hewer says: "Remember, if it sounds too good to be true then it probably is. If you are offered an attractive investment out of the blue, be suspicious, check the FCA's Warning List and seek impartial advice. Better still, if you get a cold call, just put the phone down!"