Consumers warned on pension unlocking schemes
The Financial Services Authority (FSA) has issued a warning to consumers over pension unlocking schemes, saying that they should be treated with “extreme caution”.
Normally, money can only be taken from a pension when the plan holder is aged 55 or over, but pension unlocking schemes claim to allow individuals to gain access to money in their pension pots early.
Typically, the schemes work by the company involved taking control of an individual’s entire pension fund and transferring it to a separate corporate bond.
The company issuing the bond then agrees to a loan of half the amount transferred.
Both the loan and interest need to be repaid in full before the person retires, and fees for the scheme are taken from whatever remains in the pension fund.
However, promotional material seen by the FSA does not state the exact level of fees or charges, suggesting that consumers are likely to end up with less money than expected.
In addition, schemes claim that no tax is payable from the money taken as cash, but it is not clear what rules support the claim.
The regulator says it is working closely with HM Revenue & Customs and The Pensions Regulator to find out more.
Category: Financial Services Authority News
Visited 1447 times, 1 so far today
Comments (0)
Trackback URL | Comments RSS Feed
There are no comments yet. Why not be the first to speak your mind.