The industry regulator the Financial Services Authority (FSA) have issued a warning to consumers about the pitfalls of cashing in pension plans early. They say that recent TV campaigns by certain advisers encouraging people to access their tax free cash lump sums may be detrimental and that people should consider cashing in other plans first.
Our view:
The FSA should stick to regulation and not advice. We agree that for many cashing in a pension early may mean a reduced pension and even penalties. However, for those that do wish to do it there may be a genuine need and even a tax advantage by doing it.
Annuity rates are falling daily and tax incentives on other investments are disappearing fast e.g. the twenty year tax deferral on bonds may go in the coming budget.
If you leave your pension fund invested you may not be able to buy as bigger pension fund as you can today and you may not be able to invest all of the tax-free cash in suitable investment plans.
Let quality advisers like us give the advice and the FSA stick to setting the rules.
Search the archive for more stories linked with the FSA.