If anyone provides you with a pension opportunity that sounds too good to be true, remember it usually will be.
Pension scams frequently involve companies telling you that you are free to access your pension early, and offer you a ‘loan’, ‘savings advance’ or ‘cashback’ from your pension,If you are victim of this type of scheme, you’ll not only have to pay a hefty tax charge to the Government, at least 55% but sometimes as much as 70% of your pension pot, but you’ll also have fees taken from your pension for the transfer, which can be 20% or more of your pension savings.
If you are considering transferring your pension, make sure you do plenty of research first so that you can be certain the provider you’re planning to switch to is legitimate.
Jon Greer, head of retirement policy at Quilter, said: “Ultimately, the best course of action to ensure you don’t fall foul of pension scammers is to make sure the person or firm you are dealing with is regulated by the FCA; check any offer against the FCA’s Scam Smart website; speak to Money Helper or take regulated financial advice. Given a pension is often the largest asset people have other than their home, it is well worth proceeding with care and speaking to a qualified expert before taking any actions.”
You can find out more about pension scams and how to avoid them in our guide Don’t let scammers steal your retirement.
If you are thinking about transferring your pension, as well as being on your guard against scams, you should also be certain that you aren’t giving up any valuable benefits. For example, if you have a final salary or defined benefit pension, transferring to a defined contribution pension is rarely the right decision. Few things in life are guaranteed, with the rare exception of a final salary pension. So the main risk is that by transferring out of the scheme, you are giving up a guaranteed annual income for life. You can read more about this in our guide Should I transfer my final salary pension?