Scam victims are warning that money really doesn’t grow on trees — despite what they were promised.
A High Court judge this week ordered four scammers to pay back £13.7 million they took from 245 pension savers, some of whom were persuaded to invest in a fictional truffle-tree scheme in the West Country.
And it seems that similar agricultural schemes are regularly being used to trick people out of their pensions, with everything from rubber plantations to bamboo farms being offered as investment opportunities.
In the first restitution case of its kind, David Austin, Susan Dalton, Alan Barratt and Julian Hanson were told to repay the money they had tricked pensioners into investing in fake schemes run by their bogus company, Friendly Pensions.
One couple, John and Samantha of Hereford, transferred more than £78,000, receiving £11,800 as their “commission”. While they had been told that the funds would be invested in low-risk projects, they were sent details of a truffle-tree company in the West Country. The court heard that John, 46, had invested his final-salary pension “in a scheme that I don’t understand the status of, but which I have been told is a scam. My partner appears to have lost her pension too,” he told the regulator.
Advertisement
Scammers are being encouraged by the new pension freedoms, which allow savers to take money out of a company or private pension fund from age 55.
How do tree scams work?
According to the pensions regulator, tree plantations are often used by scammers because they appeal to people’s desire to help the environment. “Increasingly, people are being called and promised enticing investments in exotic things such as rubber plantations in Brazil, eucalyptus or teak trees, or holiday developments in places such as St Lucia,” says James Glover of the regulator. “In some cases the schemes do exist, but they’re a very bad way to invest your pension. In other cases, the scheme doesn’t exist and it’s just an excuse to take your money.”
Action Fraud, the fraud reporting service, says that a quarter of pension scams in the summer of 2016 were related to potential forestry rip-offs. Victims are usually contacted by someone offering to do a pension review and are told about the chance to invest in schemes such as Christmas tree plantations or forests. The scammers persuade pensioners to transfer their money to bogus companies and then send out fake material about their supposed investments. Often it is months before victims get suspicious and try to contact the companies, only to find they don’t exist.
“These scams can exhibit some consistent themes: unusual or slightly exotic investments such as tropical beach resort hotels, storage pods, airport car parks, penny shares on overseas stock markets, or social housing projects in America,” says Tom McPhail, the head of policy at Hargreaves Lansdown, the financial services company. “They generally promise a rental yield. Typically they offer generous, but not astronomical investment returns. All these characteristics stimulate investors’ interest and make people feel they are beating the system.”
In the Friendly Pensions case, Colin from south Wales, who had given up work to care for his partner and their three children, lost nearly £50,000. He was told his money would be invested in holiday apartments in St Lucia. “The loss of my pension will have a massive impact on my life. There will be no money to draw down when I turn 55 and no pension savings for later life,” Colin, 48, says. “I was greedy. I feel stupid for throwing away my financial future.”
Advertisement
Another victim, known in court only as Donald, 57, of Hull, was saved from losing £58,000 when Reassure, his pension company, became suspicious of the scammers’ correspondence. He lost £17,000, however, when another of his pension providers did agree to transfer his money. “If Reassure had allowed my pension to be transferred it would have been a disaster. I would have lost everything. I have had a very lucky escape.”
How serious is the problem?
Action Fraud says at least £43 million has been lost to pension scammers since April 2014. However, the pensions regulator says the real number is far higher. Mr Glover says: “People are embarrassed and so don’t report it. And some are terrified they will be accused of tax fraud because they think they might have done something wrong.”
Steve Webb, the director of policy at Royal London, the insurer, says that no one should place their savings in a single investment and that schemes outside the UK should ring alarm bells.
Mr Glover says: “Anyone saying the words ‘free pension review’ is executing a scam. End of story.”
Go to fca.org.uk/scamsmart to check for fraudulent schemes.
