Due to an increased interest in pensions and pension transfer advice (thanks to factors such as pension freedoms) the Financial Conduct Authority (FCA) has issued a reminder to consumers about the potential risk of pension scams.
The alert published a number of questions that people should ask before agreeing to move their pension pot. These include:
- Have you been motivated by a call, online advert or text out of the blue to discuss your 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 your pension pot be investing in unusual investments such as overseas property, forestry, storage units, care homes, biofuels or other businesses you don't know much about?
- Does your new arrangement require you to set up a limited company?
- Have you been promised guaranteed returns and/or a cash sum from your pension?
It goes on to say that free pension reviews are designed to persuade people to move money into investment schemes that are very risky or are outright scams.
'Free' Pension Advice Warning
The warning also raises the issue of 'free' pension advice.
"Free pension reviews are designed to persuade you to move money saved in an existing pension pot to a new scheme. Chances are your money will be invested in something that is either very risky or a scam.
"Professional pension advice is not free. Professional advisers looking to act in your best interests are very unlikely to cold call you offering their services."
Most of the companies that are making these offers are not authorised or regulated by the Financial Conduct Authority, and in many cases when cash sums are released, they can be liable for up to 55% tax. This results in vulnerable investors having no recourse when things go wrong.