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How to stay safe from financial scams during the coronavirus pandemic

Recent news reports suggest that as many as five million people in the UK had fallen victim to, or knew someone who had been defrauded by, a financial scam since the coronavirus outbreak.

Action Fraud has said that a total of £4.7million has reportedly been lost by over 2,057 victims in recent weeks, with one in five of these victims targeted by a pension scam.

Andrew Tully, technical director at Canada Life, said: “Falling prey to a scam can be devastating, not only for the individual involved but also for their family and friends.

“The Covid-19 pandemic has provided a fertile opportunity for low lifes to prey on not only the vulnerable but also people who are worried and anxious about both their health and their wealth.”

Everyone from the Financial Conduct Authority to Dominic Raab have urged consumers to be on their guard against scams during this uncertain period. So, to help you avoid becoming the victim of fraud, here are five common financial scams to look out for, and what you can do to stay safe.

5 common scams to look out for

1. Pension scams

Last August, Canada Life asked people if they had been approached by phone, text or email with the offer of a free pensions review. Just over one in ten (12%) of non-retirees suggested they had been contacted this way in the preceding three months, with almost half of these people (43%) saying they were worried about scams.

Even though a ban on pensions cold calling was introduced in 2019, many people still report being contacted by telephone, as well as by email or text.

Recently, the Pensions Regulator, the Financial Conduct Authority (FCA) and the Money and Pensions Service issued a joint statement that urged people not to make rash pension decisions as criminals try to exploit concerns over stock market volatility to defraud victims out of their pension savings.

The statement urged savers not to make any knee-jerk decisions about their pension. It also recommended that, if you are considering transferring your pension, you should check who you are dealing with, and to only use firms authorised by the FCA.

Common signs of pensions scams include:

  • Unsolicited contact out of the blue
  • Claims of high returns
  • Time-limited offers that pressurise you into making a quick decision
  • Unusual or high-risk investments such as overseas property, renewable energy bonds, forestry, or storage units
  • Phrases such as ‘guaranteed’, ‘take your pension early’ or ‘free pension review’

Taking a pension early could result in a 55% unauthorised payment charge from HM Revenue and Customs (HMRC) as well as the fees charged by the scammers.

If you have any concerns, always check an investment or pension opportunity on the FCA’s ScamSmart website before signing up.

2. The furlough scam

During the pandemic, fraudsters are stealing business bank details by emailing business owners purporting to be from HMRC. They are asking for business bank account details, claiming that this is to guarantee payment of the salary subsidy (the ‘furlough’ payments).

Now that the job retention scheme has been extended this gives criminals more opportunity to steal information. This type of scam could seriously affect a struggling business, potentially leaving many employees out of work.

Similar scams have been reported regarding the various government grants that have been announced.

Always remain vigilant and, if you’re not sure about a message you have received, check with HMRC first. This brings us to…

3. HMRC scams

During the pandemic, there have been reports of several ‘phishing’ scams, where an official-looking message tries to encourage you to share personal information, such as bank details.

For example, emails purporting to be from HMRC suggest that the recipient could get a free £258 award from the government to help during the coronavirus outbreak. To claim the grant, an individual has to complete their bank details.

Another scam involves an email which tells a recipient that they are entitled to a tax refund due to coronavirus. Again, this is a phishing scam designed to get you to share your bank details. Fake HMRC emails should be reported to phishing@HMRC.gov.uk on receipt.

4. Fake adverts

In the case of fake advertisements, consumers make payments for items (often by bank transfer) and never see the products they have ordered, nor their money, ever again.

Links and email attachments often lead to fake websites which request personal information or infect your computer with malware.

Fake advertisements that have been common in recent weeks include:

  • PPE and protective masks
  • Hand sanitiser and gel
  • Vaccines or cures

If you’re not certain that a retailer is genuine, think twice before you buy. Search for the company name online or look for genuine reviews before you part with any money.

5. The tracing app scam

The government’s ‘Test and Trace’ service is a key route to exiting lockdown.

There have been some reports of people already receiving texts claiming they have come into contact with a person who has tested positive for coronavirus. These texts include a link to a website that collects enough information to compromise their bank accounts.

As the app is gradually rolled out, more scams are likely to come to light. Keep a careful eye out.

Get in touch

One way of establishing whether a pension or investment opportunity is genuine is to check with a financial planner. So, to ensure you don’t fall victim to fraud, speak to us first. Email hello@sovereign-ifa.co.uk or call 01454 416 653.

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