With effect from April 6th this year, when you reach 55 and if you have been saving in a personal or company pension, you will have wider choices with what you do with the fund you have accrued. You will still be able to cash in the fund to buy an annuity giving you a guaranteed income for life, but now you will also be able to release as much of the fund as you wish ... to spend on what you like.
Like most financial products, pensions and annuities are regulated by law, including how they are advertised and sold. However, this does not stop scammers approaching you to put your money into fraudulent or otherwise unregulated/poorly managed annuities or investment schemes, with the result that you will lose some or all of the savings you were relying on for your retirement. There will also be less protection from pension companies in the way of your fund being frozen, if you have chosen to draw your money rather than transferring it between legitimate providers.
Get started...
- Be wary of any approaches by phone, email, text or in person about cashing in your pension before you reach retirement age.
- Be wary of approaches to invest your lump sum ... especially those with returns that seem too good to be true (because they probably are).
- Always speak to a financial adviser who is registered with the Financial Conduct Authority.
Unfortunately, there are a number of fraudulent schemes in existence.
Offers to help you cash in your pension before the age of 55 may not only be fraudulent, but could constitute an ‘unauthorised payment’ and cost you a considerable proportion of your fund in tax.
The risks
- Being given misleading information about cashing in your pension before you reach retirement age.
- Tax charges and penalties of more than half the value of your pension savings.
- High charges for entering into pension liberation arrangements … typically 20% - 30% of the accumulated fund.
- Being duped with offers of up-front cash or free pension reviews to take advantage of offers or arrangements.
- Your pension savings being invested in high risk funds or bogus investment schemes.
How to spot if you are being targeted
Be wary if the following occurs:
- You see or receive offers for a 'free pension review'
- You receive unsolicited approaches over the phone, via email or text message or by a doorstep caller.
- You receive unsolicited approaches about accessing your personal or company pension before you are 55 years old*.
- You receive unsolicited approaches about investing the money released from your pension pot under the new rules.
- You receive approaches claiming to be from the government offering retirement planning advice.
- You are asked to provide your phone number and home address and/or personal financial information, when you are only enquiring about the products on offer.
- You encounter pushy advisers or ‘introducers’ who offer upfront cash incentives or suggest legal loopholes.
- You encounter companies that offer a ‘loan’, ‘saving advance’ or ‘cash back’ from your pension.
- You are encouraged to speed up the transfer process, including the ‘provider’ using an express courier service for documents.
- You are not informed about the possible tax consequences.
- Documentation is withheld from you, either with or without an explanation.
*Only in rare cases - such as terminal illness - is it possible to access funds before age 55 from your current pension scheme.
Guard against pension fraud
- Never divulge financial or personal information to a cold caller, or in response to an email or text.
- Get as much information as you can about the company’s background – trying the internet first. Any financial advisers should be registered with the Financial Conduct Authority (FCA).
- Request a statement showing how your pension will be paid when you retire, and question who will look after your money until then.
- Gain an unbiased view from an adviser that is not associated with the proposal you have received.
- Never be rushed or harrassed into agreeing to a pension transfer or investment of the cash you have released .
More Information
For more information about pension fraud, read the Pensions Reglator's advice as follows:
- If you are an individual, click here
- If you are a business adviser, click here
- If you are a trustee, click here
If you have been cold called and suspect it was a scam
Report it to the Financial Conduct Authority using their online investment scams reporting form or by contacting their Consumer Helpline on 0800 111 6768.
If you have lost money to pension fraud:
Report it to Action Fraud, the UK’s national fraud reporting centre by calling 0300 123 20 40 or by visitngwww.actionfraud.police.uk
