FCA and TPR Warn Against Pension Scams

HM The FCA and TPR are again warning investors to be careful of pension scams and are joining forces to highlight some of the most common scams and the likelihood of people falling for them. According to the report the likelihood of being drawn into one or more scams increased to 60% among those who said they were actively looking for ways to boost their retirement income.

Censuswide conducted research with 2012 adults about the six most common pension scams, the results are below:

1. Offering exotic investment opportunities- 23% of 45-65-year-old pension savers would pursue an offer of high returns in either overseas properties, renewable energy bonds, forestry, storage units or biofuels, even though these are high-risk investments and unlikely to be suitable for pension savings.

2. Calls out of the blue– 23% of 45-65-year-old pension savers would engage with a cold call from a company asking to discuss their pension plans.

3. Offering early access to your pension pot– 17% of 45-54-year-old pension savers would be interested in a company that offered to get them early access to their pension pot.

4. Guaranteed high returns on your pension savings– 13% of 45-65-year-old pension savers would pursue an offer guaranteeing returns of 11% on their pension savings.

5. Offering to review your pension for free – 10% of 45-65-year-old pension savers would say yes to a free pension review from a company they’d never dealt with before.

6. Time-limited offers– 7% of 45-65-year-old pension savers would say yes to a company who offered a special deal that won’t be around for long and offered to send a courier to sign the paperwork immediately.

The joint initiative was launched again this summer on 1 July and includes adverts on TV, radio and online to try and highlight the issue. More information can be found here.

Seasonal workers and automatic enrolment

Like other employees, seasonal workers have to be assessed to see if they qualify for automatic enrolment into a workplace pension. Assessing these types of staff can take more time because of varying hours and earnings. Employers who know their staff will be working for them for less than three months can use postponement. This postpones the legal duty to assess staff for three months.

During this postponement period, employers will not need to put staff into a pension unless they ask to be put into one. The Pensions Regulator has an online tool to help employers who have seasonal or temporary workers. Please see here for more information – view here.

Annual Investment Allowance (AIA)

From January 2019, businesses investing in qualifying plant and machinery are able to benefit from a temporary increase in the AIA. The maximum amount of the AIA was temporarily increased to £500,000 at Budget 2014. Summer Budget 2015 set the rate of AIA permanently to £200,000 from 1 January 2016.

This measure temporarily increases the amount of the AIA to £1,000,000 from January 2019 until 1 January 2021 when it will return to £200,000. The increase provides an incentive for those businesses already spending up to the £200,000 threshold to increase or bring forward their capital expenditure on plant and machinery.

Growing Number of Insolvencies

In 2018, the number of UK individuals falling into insolvency hit a seven-year high (according to the figures quoted by the Guardian in January of this year). Namely, a total of 115,299 people became insolvent after failing to repay their debts, up 16% on 2017 and the highest level since 2011.

The overall increase was mainly due to the 20% increase in IVAs (Individual Voluntary Arrangements) which are formal agreements between debtors and creditors to repay outstanding debt over a fixed schedule of repayments. An IVA will lead to a formal bankruptcy if the debt is not repaid. Based on these figures it is estimated that, roughly, one in 400 adult individuals was declared insolvent in 2018 which is quite alarming.

Investment fraud on the rise

Reports of investment fraud almost doubled to 8,153 in the first six months of 2019 from 4,113 in the same period last year, according to data from the National Fraud Intelligence Bureau. In contrast, reports of pension fraud have dropped rapidly from 1,353 in 2015 to just 345 in 2018. Commentators have suggested that financial fraud in the UK is mutating, with the number of victims of older-style ‘pension liberation’ scams dropping in recent years on the back of a series of Government interventions – including the ban on cold-calling – and a significant industry-wide public awareness campaign.

However, as pensions-based scam reports have fallen, the number of people falling prey to scams focused on their investments has continued to rise and look set to hit record highs in 2019. In January, the government made pension cold-calling illegal in a bid to tackle the rise in pension scams. However, the ban excluded investments.

Pressure is being put on the government to review the exclusion in light of the surge in investment scam reports. However, millions of people are still risk falling prey to pension scams – even those who consider themselves financially savvy. A survey by the Financial Conduct Authority (FCA) published last week found that 42% of pension savers – about 5 million people – could be at risk of falling for at least one of six common tactics used by pension scammers.

Things to watch out for:

· Watch out for investment ‘opportunities’ that appear out of the blue and sound too good to be true.

· If you are cold-called about your pension or investments by someone you don’t know, hang up immediately.

· Be extremely wary of anyone offering ‘free advice’ or a ‘free pension review’.

· Don’t be rushed or pressured into making a decision about your pension.

Weekly Market Commentary 25 October 2019

European Markets Rebound While Brexit Momentum Stalls
This week Brexit has returned to the status quo, popular in principle but impossible in practice. The complexities of leaving the European Union, or the cost of doing it simply, requires a degree of compromise that seems impossible to achieve. Factions that were united around the vison have splintered over the detail; without external guidance over what the public prioritise, either from an election or referendum, we see no end to the impasse. Despite being in limbo markets are mostly up. Limbo is a marked improvement on recent conditions.

Elsewhere possible positive signs for the French economy and improving sentiment in Italy have seen European markets surge this week, despite lacklustre data out of Germany. While this might prove temporary, it does offer hope that the global economy might get away with merely slowing rather than contracting. Much of the gains for the week come from improving expectations however, one bad headline could see them evaporate.

Global: Infosys Share Price Drops Following Complaint
This week allegations of aggressive accounting rocked Indian software service giant Infosys with shares plunging 16 per cent after the news broke. A group of employees allege that both the CEO and CFO of Infosys worked in tandem to “boost short term evenue and profits”. Infosys was launched in 1981 by six engineers and a $250 loan and has since grown to become the second largest software company in Asia employing 125,00 people worldwide with revenues of $10.9bn last year. The company is investigating the claims.

Elsewhere the planned merger between Just Eat and its Dutch equivalent Takeaway.com threatens to be gate-crashed by Prosus. The Amsterdam-listed offshoot of South African tech giant Naspers have their eyes set on Just Eat and this week offered an all cash bid of £4.9bn. Just Eat has already rebuffed three prior offers but with shareholders starting to voice their opposition to the Takeaway merger, a higher bid may swing it in Prosus favour.

Eurozone: German and France, A Tale of Two Diverging Economies
This week’s soft Eurozone data made for compelling reading with the PMI data showing a contrasting tale of two key economies. While recession fears mount in Germany, as the private sector struggles to offset manufacturing weakness, France continues to grow. Business activity beat expectations rising to 52.6 points from 50.8 last month driven by the service sector. Interestingly, French manufacturing also defied the global downward trend up by 0.4 points from the last reading (50.1). With the ECB maintaining rates at ultra-low levels, pressure is starting to mount on the German government to spend more in order to keep their economy growing.

The two stock markets however, are surprisingly correlated. So far in 2019, despite the diverging economics, the French CAC 40 index is only around 3% higher than the German Dax, with the two markets converging more recently.

China: Central Bank Pumps Money into Markets
China’s central bank pumped in 250bn Yuan (£27.5bn) into its market this week. The government is keen to navigate the expected spike in demand for cash as companies rush to meet the tax deadline (Oct 24). This was done via a seven-day repurchase agreement (buying securities from banks with an agreement to sell them back in the future) at an interest rate of 2.55 per cent. In addition to ensuring a healthy liquidity supply, the government is also seeking to keep credit growth at an appropriate pace while minimising debt build-up as the economy slows down. GDP growth was six percent last quarter – its weakest rate in almost three decades.

Meanwhile the Chinese Communist party is on the hunt for a new chief executive for Hong Kong. Following months of unrest, the popularity of the current incumbent Carrie Lam has waned, and Beijing would like to find a leader that is both popular in Hong Kong but it can also trust. That their track record has been poor so far. Two out of their first three leaders stepped down early and the fourth, Carrie Lam is proving equally disappointing.

Growth in Mortgage Possessions

According to the Ministry of Justice’s figures released in August the number of mortgage possession claims in the first two quarters of this year has surged by almost 40% compared to the same periods last year (following a large increase in the last quarter of 2018), and warrants and repossessions are also on the rise.

Stamp duty changes investigated

The Chancellor, Sajid Javid, has dismissed a front page story run by The Times that he is considering a change to Stamp Duty by switching the payment from buyers to sellers. The Times reported that it is one of several tax changes that the former Secretary of State for Housing is considering. The Times, known as the paper of record, ran the story under a strong headline, which more than suggested that the change to Stamp Duty was a given: “Sellers to pay Stamp Duty under Javid tax shake-up.”

However, the front page story and accompanying interview did not seem to back up the headline, with Javid only saying, apparently of Stamp Duty: “I’m looking at various options. I’m a low tax guy. I want to see simpler taxes.” The story led to a huge amount of discussion and speculation on social media, including on Javid’s own twitter account. Over the weekend Javid  tweeted in response: “More speculation about Stamp Duty this morning. To be clear, I never said to @thetimes I was planning to put it on sellers. I wouldn’t support that. I know from @mhclg that we need bold measures on housing – but this isn’t one of them.” Javid was appointed to the post by new prime minister Boris Johnson who said during the Tory leadership campaign that he would cut the highest rate of Stamp Duty from 12% to 7%, hinting that he might cut it altogether for properties under £500,000, and would consider reversing the tax burden from buyers to sellers. However a switch now seems to have been decisively ruled out by the Chancellor.

UK tech firms receive record foreign investment

Fast-growing UK tech companies secured a “staggering” 6.7 billion US dollars (£5.5 billion) in investment in the period to July, according to new research by Tech Nation and Dealroom. The research for the Department of Digital, Culture, Media and Sport’s digital economy council revealed that the UK has overtaken the US for the amount of investment per capita.

Funding growth was driven by US and Asian investment in unicorns such as a renewable energy company Ovo Energy and takeaway business Deliveroo. American and Asian investors pumped 3.7 billion dollars (£3.1 billion) into UK firms during the period, making up 55% of all funding. Other UK firms to secure major investment over the year so far included supply chain finance firm Greensill and fintech firm Checkout.com. Nicky Morgan, Secretary of State for Digital, Culture, Media and Sport, said: “These fantastic figures show the confidence overseas investors have in UK tech with investment flows from the US and Asia at an all-time high.

Investment trends: Millennials go for matched betting to top up income

The millennial generation is often criticized for being uninvolved in investing and not learning any life skills. They have been referred to as the “The Me Me Me Generation”. However, according to millennials, that isn’t a bad thing, as they are looking out for their own best interests. So now, when it comes to investing, they are getting there, slowly but surely. Millennials are increasingly getting into the investing game. And, when you look at their investments, you’ll see that a lot of them are based on things they use every day. There are social media, technology, and e-commerce investments at the forefront. There are also some surprising energy and automotive company contenders.

For example, millennials are not giving up on GE, but they are also sticking to relatively safe, less-pricey investments. In the main. What is interesting, though, is the growing numbers of people using free bets handed out by gambling firms to make “risk-free” tax-free gains of thousands of pounds a year with a technique known as matched betting. Gaming giants – including William Hill, Betfair and Coral – are aware that savvy gamblers, often students trying to supplement meagre incomes, are systematically using the method to “guarantee” winnings. Experts have confirmed it is perfectly legal, and although bookies know the practice occurs, they make no attempt to stop it. Gambling firms still make commission on winnings and hope to attract a different type of customer who might not normally visit their websites.