Recent pension freedoms and low interest rates offering poor returns on savings are making over 55s an increasingly attractive target for fraudsters, said the regulator.
The FCA surveyed 42 pensioners and found that victims of investment fraud lost £32,000 on average every year.
A fifth (22%) of over 55s, with above average incomes, and over a third (32%) of over 75s have been targeted by conmen in the last three years.
To avoid becoming a victim of investment scams, the FCA is urging consumers to reject unsolicited contact about investments, to check the regulator’s register to see if the firm or individual authorised before investing as well as to check the FCA Warning List of firms to avoid.
The regulator is also advising investor to get impartial advice before investing.
Rise in pension scams
The findings come just weeks after the UK government announced that it plans to crack down on pension cold calling and give firms the ability to block suspicious transfers.
Last week, the Financial Services Compensation Scheme (FSCS) warned it may impose an interim levy on life and pension advisers over the increasing number of claims related to unregulated investments in self-invested personal pension schemes (Sipps).
Little or no research
Shockingly, one in eight of over 55s questioned by the FCA had invested in financial products (such as stocks and shares) but spent very little or no time researching them before handing over money.
Over 75s, who are most likely to say they have been contacted by an investment scam, are also the group most likely to do little or no research (26%).
The most common check carried out before investing in a financial product was to look at a company’s website.
However, the FCA warned that investment fraudsters and unauthorised firms are known to “create highly professional-looking websites to entice victims”, and urged consumers that other checks need to be done to make sure an investment is genuine.
Far fewer (27%) sought professional, impartial advice, a check the regulator encourages consumers to do before investing.
Interestingly, more time and effort was being spent checking other high cost purchases, even though the money being spent is less.
The average cost of major building work in our survey was £25,000, compared to the average of £36,000 spent on as stocks or shares.
Despite this, significantly more people (47%) said that they researched building work carefully and extensively, compared to those researching financial investments to the same extent (38%).
Over half (55%) of those who have invested in financial products did so on their own, rather than making the decision with family, revealed the research.
This is more than any other major financial decision listed such as buying a house, a car or a significant holiday.
“Fraudsters will often encourage their targets to keep the investment a secret to avoid friends and family dissuading them from investing,” said the FCA.
Mark Steward, director of Enforcement at the FCA, said: “Making a significant financial investment is an important decision – be prudent, do your homework and be especially on guard if contacted out of the blue by someone you don’t know.
“Fraudsters are targeting our growing over 55 population because they are more likely to have money to invest. They may pressure you to make a quick decision or try to make you feel stupid for not taking up their bogus offers.
“No investment decision should be rushed. Be sceptical. Be suspicious. Ask questions and get answers you can verify. And remember, if you receive an unsolicited call about an investment opportunity that sounds too good to be true then it probably is. The best thing to do is hang up.”