Business

Beware increasing number of dubious investment schemes on offer

Michael Kennedy warns that 'as the number of savers accessing their pension savings increases, so too does the number of dubious investment schemes on offer'
Michael Kennedy warns that 'as the number of savers accessing their pension savings increases, so too does the number of dubious investment schemes on offer' Michael Kennedy warns that 'as the number of savers accessing their pension savings increases, so too does the number of dubious investment schemes on offer'

I HAVE two snippets of information from the newspapers in the past week, and I’d like to run them by you – especially if you are between the age of 55 and 64.

One of our larger pensions companies announced a significant increase in its pensions and savings business, with profits up by 7 per cent in the first half of 2016.

Significantly, the company noted this was due in no small part to drawdown business, assisting savers to ‘draw down’ funds from their pension.

Drawdown business alone was up 8 per cent in the first half, indicating what a popular option this has become with savers.

As we know, the ability to draw down slices of your pension has been a new feature of our financial lives since April 2015, and has given the public much more flexibility to access or reinvest their pension funds.

Unfortunately, with large amounts of cash in circulation as a result, much of it looking for a new home in some form of investment, dubious characters on the fringes of the financial scene have seen an opportunity. A large number of fraudulent schemes are now under way, designed to separate vulnerable savers from their cash.

Which brings me to the second snippet.

A north of England-based company with more than £3 million of investments has been wound up following an Insolvency Service investigation.

The company had convinced customers to invest in a number of investments abroad, which were of course not subject to UK regulation.

The Insolvency Service declared that there was no value in the investments made, which included unregulated collective investment schemes and an unsuccessful land development in Florida.

In a statement , the Insolvency Service said: “The structure of this ... scheme was deliberately opaque and the lack of transparency was added to by the failure of those in control of the company to fully cooperate with the investigation.”

Taken together, these two pieces of news show that as the number of savers accessing their pension savings increases, so too does the number of dubious investment schemes on offer.

According to some recent figures from the Office of National Statistics, 10.8m people have received unsolicited calls offering “pensions advice” in the past year. These calls are particularly directed at people in the 55 to 64 age group, those most likely to be interested in accessing their pensions.

London is the top location for these schemes, although they are also on the increase in other cities. The epidemic of dodgy investment companies with prime addresses in the City of London is now at the point where the city fathers fear damage to London’s reputation as a financial centre.

Many such operators use real offices in some of London’s business skyscrapers. Besides dubious or fictional investment schemes, many are persuading their victims to buy fake items disguised as luxury goods.

One police spokesperson said they had been into premises where boxes of diamonds were stacked up like pairs of shoes. The diamonds were badly flawed, and worth about £100, but were being sold for £9,000 or more.

Many more fraudulent schemes do not actually occupy an office, but arrange a prestigious London address as a front for their operation.

The police have already identified 92 centres offering “virtual” office addresses, consisting of mail and phone forwarding services.

In response to pressure to mount a crackdown on these companies, the police set up a stall at an alternative investments fair in May. Advance news of their attendance prompted several prospective exhibitors to suddenly pull out.

The solution to avoid becoming a victim of financial crime is simple. If you are thinking of accessing your pension, or using part of your pension savings to make an investment, then don’t go it alone.

A reputable, professional financial adviser will steer you clear of investment scams, and ensure that your money ends up where you want it: in the safe hands of a genuine and legitimate, professionally operated investment provider.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005