The FCA has issued another pension risk warning: “Protect your pension pot from risky investments and scams”.
Given increased interest in pensions and pension transfer advice, the FCA, and indeed us, wish to remind you to ask the following questions when responding to prompts to transferring money from your pension fund:
The FCA suggests you take a step back and ask yourself:
Have I been motivated by a call, online advert or text out of the blue to discuss my pension or to offer a free pension review?
Is the new scheme a self-invested personal pension (SIPP), a small self-administered scheme (SSAS) or a qualifying recognised overseas pension scheme (QROPS)?
Will my pension pot be investing in unusual investments such as overseas property, forestry, storage units, care homes, biofuels or other businesses I don’t know much about?
Does the new pension need me to set up a limited company?
Have I been promised guaranteed returns and/or a cash sum from my pension?
Why is a free review suspect?
As you may be aware, we charge set fees for reviewing pension schemes. The FCA suggests that free pension reviews are designed to persuade you to move money saved in an existing pension pot to a new scheme. The chances are your money may then be invested in something that is either very risky or a scam.
Some of these investments are badly run, while others may be outright scams. As they are promoted as long-term pension investments, several years could go by before you realise something is wrong.
You could lose some or all of your pension pot. Even if the investment is reasonably well run, unusual investments tend to be unregulated and high risk. Returns are not guaranteed, it is generally difficult to have access to your money, and all your money is at risk.
Where cash sums are released, you may have unexpected tax charges to pay of up to 55%.
Most of the companies making these offers are not authorised or regulated by the FCA. This means you may have no right to complain to the Financial Ombudsman Service or to claim compensation from the Financial Services Compensation Scheme if things go wrong.
For most individual investors, investing their pension savings in unregulated investments is unlikely to be in their best interests - you could lose everything you have invested, significantly reducing your retirement income. All investment alternatives should be considered and leaving your pension pot where it is may be the best decision.
Get Professional Advice from an FCA registered Financial Adviser Only
If you are considering investing some of your pension pot in unregulated investments, you should first seek impartial advice from us first.