FSA warns on pension unlocking
The Financial Services Authority (FSA) is urging consumers to treat any schemes that offer the chance of unlocking money from pension savings early 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 before they retire.
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.
However, the loan and interest need to be repaid in full before the person retires and promotional material for schemes seen by the FSA omit details of fees or charges, suggesting that people are likely to end up with less money than when they set out.
According to the FSA: “Early access to pensions is rarely in anyone’s long-term financial interests”.
Category: Banking News, Borrowing & Lending News, Financial Services Authority, Pension Product News
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