At Which? HQ, I sit opposite our money helpline – a crack team of financial experts who field thousands of queries about money issues our members are facing. This gives us incredible insight into the experiences people have with providers of financial products and services – and helps Which?, as a consumer champion, get to the heart of the rip-offs that exist in this market.
This summer, we’ve seen a spike in high-risk investment calls. Ordinary people, now suffering their eighth year of record-low interest rates, are being contacted out of the blue about big-return, unregulated investment “opportunities” that come with zero consumer protection.
In July alone we had calls from people approached about investing in car parking, overseas property, forestry and Bitcoin, wondering if they’re worth considering.
And, sadly, for every inquiry of this nature, we can cite a real-life example of someone who’s done exactly the thing they’re asking about and lost their entire investment as a reason to sidestep these lucrative money-making schemes.
There’s the gentleman cajoled into investing in cemetery plots which promised a 36 per cent annual return, whose calls and emails are now ignored. Or the lady who was scammed twice – first into buying non-existent land offering triple-digit returns, and again by the fake firm that offered to win her money back for a £5,000 fee.
Just because an esoteric investment isn’t regulated and appears to be risky, of course, doesn’t necessarily mean that it’s a scam. After all, people have made tidy profits investing in unregulated assets, such as art, wine and gold, for decades. But often, there is something darker sitting underneath these high-risk, high-return schemes.
For example, in May the Serious Fraud Office revealed that it was investigating a firm offering investments in storage pods – the lock-ups that seem to pop up off major A roads across the country – which promised returns of between eight per cent and 12 per cent every year.
The most pernicious part is that many people who fell for this scam were persuaded to take money out of their “gold-plated” final salary pensions – which pay a guaranteed income throughout retirement – and transfer it to this investment.
It’s thought that 1,000 people have lost as much as £120 million to this scam, in the process seeing 40 years’ worth of diligent saving for their future disappear with it.
Fraud is now the most common crime in the country, with over 3.5 million offences (in England and Wales alone) in the year to September 2016. Indeed, almost one in 10 people now fall victim to online fraud.
Combine that with the next-to-nothing you currently earn from “safer” cash investments and the introduction of the pension freedoms in 2015, which make it easy for consumers to withdraw as much of their pension as they wish in cash, and a perfect scamming storm has been created.
The government has been consulting on bringing in a ban on pension cold calls since November 2016. Figures suggest that a staggering quarter of a billion scam calls take place every year, which led to pension fraud losses of £19m in 2015 alone.
It’s clear from the conversations we have consumers are finding it increasingly challenging to deal with the sophisticated tactics fraudsters use and, left untackled, this could snowball into a multi-billion pound problem. Action can’t come soon enough.
Gareth Shaw is head of Which? Money Online