insideKENT Magazine Issue 64 - July 2017 | Seite 174

LAW
ADVERTISEMENT FEATURE
PENSION SCAMS –
THE KEY THINGS TO LOOK
OUT FOR
Pradeep Oliver, a financial services negligence
specialist at law firm Cripps, looks at the upsurge
in pension fraud following the introduction of
the pension freedom reforms.
Pradeep Oliver
The pension freedom reforms announced by George Osborne in 2014
were welcomed by most people with personal pensions. Individuals
over 55 were allowed the flexibility of being able to obtain access to
their own pension pots without being forced to take out low paying
annuities at retirement.
Unfortunately, the freedoms are something of a double-edged
sword and have opened the door to a record level of unsuitable “non-
standard” investments being marketed to ordinary retail customers.
In the current climate of unprecedented low interest rates it is easy
to understand why a low risk investment promising guaranteed double-
digit returns is an alluring prospect, however consumers should bear
in mind the well-worn mantra that “if it seems too good to be true, it
probably is”.
Figures released by the City of London police showed that reported
losses sustained in pension scams soared to a monthly high of £8.6m
in March 2017. The figures show more than £42m has been lost to
“pension liberation fraud” since April 2014. It is likely the true figure is
much higher as there is some reluctance on behalf of victims to report
their loss.
WHAT ARE THE WARNING SIGNS?
Cold calling
Customers are called out of the blue by unregulated companies offering
a “free pension review service”. This is the first step of a slick sales
operation designed to convince the customer that his or her current
pension is not performing adequately and that there are far better
options on the market. This leads to an introduction to a well-marketed
non-standard investment scheme promising high returns for little or
no risk.
Exotic sounding and/or overseas investments
Due to their high-risk nature, most traditional pension schemes are
not permitted to hold these non-standard assets in their funds.
There are a myriad of such pension investments on the market at
the moment, varying from shipping containers, storage pods, overseas
farmland, biofuels, carbon credits, fine wines, hotel rooms, commercial
property schemes to overseas property developments.
The FCA website (www.fca.org.uk) has provided a helpful warning
list that identifies the investments to watch out for and suspect firms.
• Unsellable/difficult to value – even after the initial fixed period there
is often no easy way to exit from the investment because there is little
or no secondary market, therefore the investments are very difficult
to value.
Guaranteed returns
Guaranteed returns for a fixed period are an obvious attraction but the
guarantee is often no more than an incentive to obtain as much
investment as possible and is not indicative of the ongoing return that
an investor could expect to achieve. It is not unusual for the return to
be a limited return of the capital that was originally invested and not
growth at all.
What can I do if I have invested in non-standard assets?
Victims of these operations often consider that there is nothing that
can be done. This is not necessarily so.
A business must be authorised by the FCA to conduct investment
business, these are known as “regulated activities”. Regulated activities
cover most investment advice, including arranging an investment,
particularly if it concerns a pension transfer. If an individual or firm
engages in a regulated activity without possessing the necessary
authorisation this is a criminal offence.
There are comprehensive rules which govern the provision of
financial services and particularly the marketing of investment products
to individuals. If a customer has suffered loss as a consequence of a
breach of these rules it may be possible to recover losses.
There are various avenues that can be considered to recover losses,
these can involve a complaint to the Financial Ombudsman Service,
the Financial Services Compensation Scheme or a civil claim through
the courts and legal advice should be sought to advise on the most
appropriate course of action.
If you have any questions or would like further information please
contact Pradeep Oliver on 01892 765 453 or at
[e-mail].
About Cripps
Common features of non-standard assets are:
• Speculative – the investments are hugely volatile. The success or
failure of the investment often depends on highly unpredictable
market forces (for example the rental demand for a storage pod in a
particular location).
• IIliquid – there is often no ability for a customer to obtain a return of
capital for a fixed period without paying large redemption penalties.
www.cripps.co.uk
@crippslaw
Cripps is a key regional law firm
serving clients nationally and
internationally from offices in Kent
and London. Recognised
countrywide for both its commercial
and private client work, Cripps is
listed as a top law firm by
eprivateclient. The firm focuses on
wealthier families, entrepreneurial
businesses and the real estate sector.
Find out more at cripps.co.uk
This article gives examples and is intended for general guidance only.
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