Beware of Pension Rip Off Deals
Login and add to My RMT
BEWARE OF PENSION RIP OFF DEALS
It has been reported that unscrupulous companies are taking advantage of the difficult financial climate by encouraging individuals to exchange the value of their occupational or private pension pots for a loan or cash payment.
As a result of legislation introduced on 6th April 2006 many members of pension schemes are unable to receive their benefits until age 55, depending on the rules of the fund. Companies, normally advertised on websites or in newspaper adverts, are offering ways that pension scheme members can draw on their pension before age 55 despite the fact that individuals will be worse off in the long term.
The Pensions Regulator has warned that while an offer of a loan or cash payment may sound attractive, it is often just a scam to get hold of your money. The Financial Services Authority (FSA) and HM Revenue and Customs (HMRC) are warning individuals not to be taken in by adverts or cold-calls encouraging them to give up their future pension benefits for a cash payment or loan.
The way in which these schemes work is that a member’s already built up pension pot is invested into a high risk investment structure, often based overseas, with no guarantee that members will get their money back. While some members may find the appeal of extra cash tempting the following risks should also be considered:
· Some of these schemes may not be genuine and members risk losing their entire pension entitlement
· Fees charged my these companies are often excessive which can result in members only receiving 70% to 80% of the true value of their pension pot
· If you take money out of your pension entitlement early this will normally be classed as an unauthorised payment and therefore will be subject to tax charges of up to 55% of the amount being transferred
The warnings from the regulatory bodies should not be ignored. While an offer of cash payment or loan may be tempting to individuals struggling for money, those agreeing to these ‘dodgy deals’ face a poorer retirement as a result. Member’s should avoid these deals at all costs and under no circumstances should members consider transferring their built up pension rights before seeking Independent Financial Advice.