Is this the latest pension mis-selling scandal?

How to decide if transferring a pension is right for you.

This week, Steve Webb, the pensions minister has arranged an emergency meeting with the Pensions Regulator to discuss the fear that thousands of workers have been enticed to give up valuable benefits in exchange for less generous cash-in-hand payments.

How to decide if transferring a pension is right for you.

This week, Steve Webb, the pensions minister has arranged an emergency meeting with the Pensions Regulator to discuss the fear that thousands of workers have been enticed to give up valuable benefits in exchange for less generous cash-in-hand payments.

The problem centres on transfers out of Final salary schemes which promise pensions based on earnings and length of service rather than on the unknown of the stock market.Companies who are looking to make reductions in the cost of providing these final salary pensions have been trying to persuade members who no longer work for the company to switch into “defined contribution” schemes, which are invested directly in the stockmarket. They have been offering upfront cash payments, the option of taking pension benefits early or an enhanced “transfer Value”.

The reason that the regulator is concerned is that the differences between the two completely different types of pension are not being adequately explained to the members. Even more concerning is that evidence is emerging that inaccurate information has been given to members regarding the value or security of these pensions. 

Many of these members do not have access to independent advice or if they do obtain advice the adviser’s income increases with the number of members they encourage to switch away from the final salary pension. This is not a good situation.

For some people there may be good reasons for transferring, but independent advice must be taken before making an irrevocable decision.

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