Mon. Dec 4th, 2023

On her retirement, Janet Howland* searched online for suitable investments for her pension pot. Days after her internet search, she was telephoned by a company calling itself Saga Investments and offering a five-year fixed-rate bond at 3.2%. It was only after she had transferred £70,000 that she discovered it was a scam.

Investment and pension fraud has soared since the start of the coronavirus pandemic. Reports of scams that clone the details of genuine companies regulated by the Financial Conduct Authority (FCA) were up by 29% during the first month of lockdown and, in 2020, victims lost an average of £45,242 each to criminals imitating trusted brands such as Aviva and Allianz, according to Action Fraud. The real figure is thought to be far higher, since surveys suggest that half of those targeted fail to report what has happened.

The financial impact of the pandemic is likely to make more people vulnerable to these scams, which promise attractive returns on diminished savings.

Many of the victims, like Howard, are older people at or approaching retirement age. Since 2015, over-55s have been able to access their pension pot. As a result, this age group has been increasingly targeted by financially savvy criminal gangs who use sophisticated tactics to trap their victims.

Howland was sent a series of professional-looking emails from what appeared to be a Saga email address, bearing the Saga logo and a link to its genuine website.

They stated that the investment schemes in question were being offered in partnership with Goldman Sachs International and were protected by the Financial Services Compensation Scheme.

Howland was asked for ID to satisfy compliance requirements, then sent a depositor agreement to sign. The warning sign was that she was asked to transfer the funds in seven payments, over seven days, from her Nationwide account to Planix Ltd, but plausible-sounding explanations from the scam firm’s “compliance team” reassured her.

“They were very professional in their approach,” says Howland. “I did check online for the scheme they were offering, and couldn’t find any details. When I questioned this, I was informed that they didn’t advertise this offer as it was purely for the over-60s. Later, when I queried the bank’s warning message that the account name and number didn’t match, I was told banks were slow at getting all the companies on to the new ‘confirmation of payee’ system.”

Weeks after her first investment, Howland was contacted again and offered the chance to pay into a corporate bond. She agreed to invest the remainder of her pension pot, deposited in a savings account with Coventry building society. When she tried to transfer the £46,000, Coventry blocked the payment and asked her to call its fraud team. “They questioned me about the transfer, and looked into it for me. It was then I realised that I had been scammed,” she says. “Thankfully, due to Coventry’s system, I did not proceed.”

Nationwide, which had not questioned Howland about the seven £10,000 payments, refused to refund any of the money, and says that it considers its “control measures” satisfactory. The building society is signed up to the contingent reimbursement model code, a voluntary scheme run by the banking sector to compensate fraud victims who have not been unduly negligent. It told the Observer that Howland had been negligent in ignoring two automated warnings when transferring the money.

“When she made the payments a ‘confirmation of payee’ check was done, which highlighted that she wasn’t paying who she thought she was,” it says. “She was also shown the appropriate investment scam warning, which matched her situation, and had she visited the FCA warning list as advised, she would have seen the warning about Saga being cloned. As no error was made by the society, we are unable to refund her loss.’

The FCA warning relates to a clone of Saga Services Ltd, with different contact details to Saga Investments.

Howland, who now faces a financially restricted retirement, says the scammers had convincingly explained away the confirmation of payee alert, and does not recall seeing the investment warning. She is escalating her claim to the Financial Ombudsman Service, which has criticised banks and building societies for relying on generic warnings, instead of questioning unusual transactions.

Saga says: “We became aware of this particular scam in late 2020 and took immediate action, working with the FCA, the police and Goldman Sachs to put in place all the measures at our disposal to stop the fraud and protect customers.”

Goldman Sachs says it investigates all claims of fraud and takes appropriate action.

The FCA, which issued 1,100 alerts about scam investment companies last year, warns people to steer clear of any unsolicited marketing calls or messages and to seek independent financial advice. Those tempted by a scheme should check out the company on the FCA register and use the listed contact details, rather than those provided by a cold caller.

Mark Steward, FCA executive director of enforcement and market oversight, says: “Clone investment scams can look real and sophisticated. If you’re considering an investment, check our warning list of firms you should avoid. And if you’re still unsure, call our consumer helpline.

“When it comes to clones, I cannot emphasise enough how important it is to double-check every detail.”

*Not her real name

By senior