Mark Benson
The financial services industry attracted more than its fair share of criticism in years gone by. This is an industry that is integral to your long-term savings, long-term investments, and long-term pension income.
This begs the question; we all take advice about our investments, so why not take advice about a pension fund transfer?
Over the last few years, we have seen a significant increase in regulations surrounding pension investments and pension transfers. This has, in many ways, righted the wrongs of years gone by.
The 1980s was a period in which the financial services industry was “self-regulating,” which unfortunately didn’t always end well. Fast forward a few years, we see the UK government/regulators have created the more formal regulatory structure before us today.
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If you are looking to transfer a defined benefit pension scheme worth more than £30,000, you are legally obliged to take financial advice from a regulated advisor. This is the only legal stipulation regarding the transfer of pension funds.
However, it does beg the question, unless you have experience with pension fund transfers, why would you go into these situations without advice?
There are few defined benefit pension schemes available today, with the majority still in existence set up decades ago. As the term suggests, the benefits from a defined benefit pension scheme are set in stone.
In fact, they will be calculated in relation to your final salary at your place of work. If you move work, transfer your pension fund, etc., then adjustments will need to be made.
However, the basic premise of a defined benefit pension scheme is the guarantee/certainty of future income levels.
There are many different types of defined contribution pension scheme, one of which is a SIPP (self-invested personal pension). The main difference between a defined contribution pension scheme and a defined benefit pension scheme is the way in which pension payments are calculated.
There is no guaranteed level of income with a defined contribution pension scheme - often referred to as a money purchase scheme. If you are looking to acquire an annuity, you will simply need to buy one in the market at the prevailing rates.
No. The annuity rates available today are very different from those of the 1980s, which were much higher. Due to a mixture of reduced investment returns and increased administration expenses, the regulations have been changed.
You are not obliged to use pension fund assets to acquire an annuity on retirement. There are various options such as 25% tax-free drawdown, regular income, irregular drawdowns, and many other variations.
This perfectly illustrates why you need to have a financial adviser in place to help with your pension affairs.
At this moment in time, you can access your pension fund when you hit 55 years of age. Recent changes mean that from 2028 the earliest age you can access your pension fund will be 57.
This is a reflection of the pension liabilities faced by the UK government and the fact that, in general, we are living longer. There will likely be further movement in pension fund regulations in the short, medium, and longer-term as the UK population continues to age.
Over the years, we have seen literally millions of pounds stolen by pension fund fraudsters, offering to “help” those with their own pension fund. It can be difficult for the fraudsters to gain access to defined benefit schemes, especially those over £30,000 in value, so they tend to focus on defined contribution schemes.
There are a number of factors to take into consideration:-
Unsolicited phone calls with regards to financial assets such as pension schemes have been outlawed since January 2019. Even if the voice on the other end of the phone has an “interesting offer,” why are they flouting the law?
We hear this time and time again; if it looks too good to be true, then it probably is too good to be true. Unfortunately, in these challenging economic times, it is very easy to get “carried away” with promises of huge long-term benefits.
Take a deep breath, take a step back, and look at things from a distance. Do they still make sense?
Very often, pension fund fraudsters will look to glean your trust and then twist the knife. They may mention that these “excellent investment opportunities” are time-limited and filling up quickly.
The idea is simple, place more pressure on the pension fund holder to transfer their assets without an in-depth period of reflection. Don’t fall for it!
Rather bizarrely, many of these fraudulent pension fund advisers will refuse to give direct contact details so that you can call them. You may also find rather vague contact details on their website and perhaps a PO Box pickup address.
Aside from the fact they don’t want you to contact them, leaving them to disappear with your assets, this can also add to the pressure to sign up.
For some reason, people seem to review their savings, investments, insurance policies, and pension funds at different times. In reality, all of your financial assets, including mortgages, personal loans, etc., should be considered as an overall package as opposed to separate financial entities.
For example, if you saw an increase in your salary and were considering pension fund options, you may decide to increase contributions. However, if at the same time, you were also reviewing your personal loan/credit card debt, often high interest, you may find a better use for your additional capital. Can you see what we mean?
Whether you are legally obliged to take advice about a pension fund transfer or seek it on a voluntary basis, it makes no sense to transfer without advice. You should approach a regulated financial adviser, thereby offering you a degree of protection and ensuring that they abide by the regulations.
You wouldn’t carry out an MOT on your car without experience, so why would you look to transfer your pension fund if this was not your area of expertise?
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold pension and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.
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