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FCA warns consumers over risky DB transfer investments

Pension savings-2015The regulator has urged consumers to be careful when considering transferring their pensions into a new scheme.

The FCA is warning consumers to be wary of any contact out of the blue by call, email or text offering to discuss their pension or a free pension review.

Savers should be cautious about any unusual investments such as overseas property, forestry, storage units, care homes or biofuels, it says. Guaranteed returns, cash lump sums or the requirement to set up a limited company in order to invest should also be treated with caution.

The watchdog previously alerted consumers to potential scammers in August 2014, shortly before the pension freedoms rules were introduced.

Reiterating its concerns, the FCA says: “Free pension reviews are designed to persuade you to move money saved in an existing pension pot to a new scheme. Chance are your money will be invested in something that is either very risky or a scam.”

Steve Webb: DB transfer demand? You’ve not seen anything yet

The regulator warns that some schemes are simply badly run investments while other may be outright scams. Because many are pitched as long-term investments, it says consumers may not even realise something is wrong for several years.

The FCA adds: “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.”

Consumers should be sure to check any company offering advice or a pension review is authorised by the FCA. The regulator advises anyone considering investing their pension pot in unregulated schemes to seek impartial advice unconnected to the firm which has contacted them.

Savers releasing cash sums from their pension funds could have to pay tax of up to 55 per cent, and those who have taken unregulated advice will not be entitled to protection from the FOS or FSCS.

The warning comes as the FCA reveals it is working with the City of London Police on an investigation concerning financial advisers HBFS Financial Services.

A 49-year-old man from Borehamwood has been arrested and customers of HBFS are being advised to check the status of any investments made through the company.

A spokesperson for HBFS said: “HBFS is one of the UK’s largest introducers to the Old Mutual Group, onshore and offshore, and all funds held on both platforms are secure and unaffected by the Investigation.”


Justin Cash, Editor of Money Marketing

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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Applies to DC schemes as well as DB and in fact less likely to get caught through the latter as specialist advice is mandatory. Glad the FCA agree with what the industry has been saying for the last 6-7 years though.

  2. Very sound advice from the regulator

    I echo Martin above this needs to and applys to DC schemes as well !

  3. Urging consumers to be on their guard is all very well, but via what media? If such warnings are confined just to the FCA’s own website and the trade press, the likelihood of them being noticed, let alone heeded, by the very people most vulnerable must surely be remote. What’s needed is a (competently) coordinated media campaign via widely read non-trade newspapers, television and local radio (and not another hugely expensive but dismally cheesy short such as the one used to publicise the approaching deadline for claims about mis-sold PPI).

    • Who will pay for that? Do you know how much an advert on TV at primetime costs?

      The previous ad campaign was paid by the banks (as they were the worst PPI offenders), ergo, this one should be paid for by advisers?

  4. You can shout as much as you want, unless it has happened on East Enders its not life as they know it.
    I have been saying for years, just do story lines within the consumers favorite TV programs, then and only then will many consumers understand and avoid.

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