Freedom can be a wonderful thing, especially when it leads to better things. At least that was the idea behind the pension freedoms granted in 2015. The pension revolution was supposed to give Brits the freedom to access their savings whenever they want and to invest them however they choose.
For the most part, that’s been the reality for savers, who’ve appeared in droves to take advantage of the new freedoms.
Pension Transfers are Booming
As of the two-year mark, some statistics indicate the transfer rates have soared to as much as 170% greater than prior to 2015, according to research from Hymans-Robertson (1). Administrators are noticing a steep rise in questions from clients, too.
Understandably, savers have lots of questions. With freedom comes choice, and choice warrants knowing the options. Unfortunately, there’s a gaping hole in the financial knowledge that UK savers seem to hold.
As a result, financial advisers have had to step up and help inform their clients to prevent them from making poor decisions.
Bad decision-making isn’t the only danger, however. For those savers who don’t seek advice from the right places, a golden opportunity opens up for scammers.
Beware Who Comes a’ Knocking
Billions of pounds’ worth of newly-unchained pension funds tend to bring out dollar signs in everyone’s eyes, including scammers. Sure enough: every year in the UK, scammers place 250 million scam calls (2).
They use targeted door-knocking strategies to lure unknowing pensioners and savers into financial products that may not be suitable. That puts trillions of pounds at risk, as unknowing pensioners are sometimes apt to follow their noses down the wrong paths.
What does the wrong path look like?
Very often, a bad decision takes the form of cashing in a defined benefit (DB) pension and then putting it into a savings account. That means shifting a tax-favored account to one that gives no tax benefits at all. Secondly, there are hardly any financial benefits to savings accounts these days, with interest rates as low as they are.
Other bad decisions involve being sold the wrong type of financial product. Some pensioners are misinformed or under-informed and end up purchasing the wrong type of annuity, for example.
Advice for Avoiding Scammers
If you’ve read this far already, then you probably know the best defense against pension transfer scams: be informed about your options… all of your options.
Remember, knowing about only one or two of your options can be as harmful as not knowing any options at all. Seek sound advice from a certified professional adviser whose professional duty is to help you find the best options for your savings.
How About Ex-Pat Pensioners & Savers?
The realities of pension transfers and the financial decisions that go along with the new pension freedoms are even more complex for expats. QROPS rules are shifting, and taxes shift right along with them.
Advisers have professional and moral obligations to help savers navigate these murky waters. These advisers are on the front lines of helping Brits stay on the path to a secure retirement. This is especially true overseas, where the rules are even cloudier and more complex.
Therefore, the advice holds even truer for expats: seek out qualified advisers who have a sound reputation in handling overseas pensions and transfers.
Safeguarding Overseas Pensions for Expats
Tim Carroll is there on the front lines, facilitating the transfer process and helping savers make informed decisions that result in better outcomes for their money. Call Tim for a free pension review and to learn how to transfer and increase your UK pension today.
- Pension Freedom and Choice — 2 Years On. Retrieved 5/202017 from http://web1.hymansrobertson-phase2.whitespacers.com/news-and-insights/news-and-blogs/blog/pension-freedom-and-choice-2-years-on/
- Autumn Statement. Chancellor of the Exchequer. Retrieved 5/20/2017 from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/571559/autumn_statement_2016_web.pdf