Hardly a day goes by without one of our advisers getting an unsolicited text offering to unlock their frozen pension, make it grow faster or pay us a cash bonus for moving the pension to a new investment.
Occasionally we’ve replied and received calls from ‘advisers’, promising us the earth, only last week one of our team was offered early access to 25% of his pension and a guarantee that the balance would grow at 15% a year; all this from a salesperson who admitted to not being regulated, despite somehow being able to provide advice.
Such claims are frankly ludicrous and easy for us to spot, but there are undoubtedly unsuspecting people, perhaps in desperate need of cash, who fall for the slick sales patter and tempting offers. The authorities are clearly concerned, with the Pensions Regulator recently launching their ‘Pension Predator’ campaign.
So how do you avoid falling prey to an unscrupulous adviser, salesperson or company? We’ve pulled together six hints and tips to make sure you don’t become their next victim.
1. Don’t ever reply to a unsolicited text
No matter how tempting the message, the golden rule to avoiding being scammed is to simply not reply to unsolicited texts.
No reputable firm of financial advisers would use unsolicited texts as a way of generating new clients, press delete and move on, it really is that simple.
2. Only use regulated advisers
In our experience most of these texts are sent by marketing firms, who then pass leads on to unregulated salespeople. They might call themselves advisers, but if they are not on the FCA (Financial Conduct Authority) register, they are not regulated here in the UK and should be avoided.
You can check someone is registered with the FCA by clicking here. If the person offering you ‘advice’ doesn’t appear, again it’s simple, move on and find someone who is.
Even if the adviser is registered with the FCA, but the deal they are offering sounds in anyway suspicious or too good to be true, then take a second opinion. There are numerous directories of Independent Financial Advisers available, our two favourite are Unbiased and Vouchedfor.
3. “No loopholes” to the under 55 rule
The word ‘liberate’ generally has positive connotations, but ‘pension liberation’ is the exception which proves the rule.
The term ‘pension liberation’ is now widely used by firms promising you access to your pension before you are 55. You might be told, “this scheme is different”, “it’s a loan to get round the rules”, “there is no tax to pay”, or “we’ve found a legal loophole”; they are wrong, no if no but’s, they are wrong, don’t take our word for it, see what HMRC (Her Majesty’s Revenue & Customs) have to say about the matter.
HMRC issued a blunt warning last month and made it very clear there are no loopholes, even if a loan arrangement is used and anyone accessing their pension fund before the age of 55, unless they are retiring through ill health, will landed with a whopping tax charge of 55%.
Remember, any tax due will need to be paid personally by you, even if you have spent the money from your pension or offer to pay it back HMRC will stull pursue you for the tax.
Again, it really is simple, ignore what unscrupulous ‘pension liberators’ tell you, they haven’t found a loophole and if you do access your pension before 55, HMRC will find you and make you pay the tax.
4. Avoid risky investments
Many of the pension scams involve placing the remainder of your pension fund in a risky, and often unregulated, investment, sometimes based overseas.
Again it’s very simple, don’t invest in something which you don’t understand or carries a greater degree of risk than you would normally be prepared to take.
Remember too, just because the marketing literature tells you an investment is guaranteed, this is rarely true; offers of high returns, coupled with guarantees, should be treated with particular scepticism.
Put simply, if an investment looks too good to be true then it probably is and you should avoid it.
5. Don’t be tempted by cash bonuses
Many pension scams offer you a ‘cash bonus’ to encourage you to invest.
In reality the ‘cash bonus’ is nothing more than a split of the commission paid to the salesman for selling a particular investment. Furthermore, there are rules which prohibit members benefiting from their pensions, including commission ‘kickbacks’ or inducements, before the age of 55; anyone who does it likely to fall foul of these rules and end up with a significant tax bill.
Much like sending text messages, any reputable Independent Financial Adviser (IFA) would not need to incentivise you to follow their recommendations. If you are tempted, take a step back and ask yourself why the salesman needs to bribe you to invest? The answer should be obvious and tell you everything you need to know.
6. Don’t be rushed
The Pension’s Regulator has warned of firms pressurising people into signing up quickly.
Investors should be wary of any adviser or salesperson that uses tactics to get you to commit sooner than you would rather, or tries to talk you out of getting a second opinion.
All reputable IFAs will give their clients as long as they need to think over the advice and their options before making a decision, any pressure to sign up quickly, with false deadlines being imposed, should trigger warning bells.
Don’t be tempted
No matter how much you need the money, or how persuasive the offer sounds, accessing your pension fund before you are 55, or making risky investment decisions, is a sure fire way to guarantee a poorer retirement.
Keep your pension safe and your life simple, follow our six tips to stop you getting scammed and seek independent financial advice from an FCA registered and regulated adviser,
Our team of Independent Financial Advisers in Nottingham are experienced in advising people on their pension options call one of our IFAs today on 0115 933 84330115 933 8433, alternatively enquire online or email firstname.lastname@example.org
If you would like advice on your pension our team of advisers are here to help you, and yes, we are registered and regulated by the Financial Conduct Authority!
You can check us out on the FCA register by clicking here, our Firm Reference Number is 515511