Publishing its top 10 risks for investors, the firm says pension fraudsters that have already liberated hundreds of millions of pounds of pension fund money in recent years using scam pension schemes will find it even easier to target the over 55s with seductive offers of ‘too good to be true’ ‘guaranteed’ investment schemes.
Unexpected tax bills and transfers out of final salary schemes were listed second and third in Hargreaves’ top 10.
Hargreaves Lansdown head of pensions research Tom McPhail says: “The pension freedoms are hugely popular but they are not risk free. Over time we believe investors will adapt to these new rules and use them to their advantage. However, the first waves of investors taking advantage of the new rules in April this year are particularly vulnerable to unwanted or unexpected problems with their pensions, so it is vital that everything possible is done to make sure they are well looked after.
“Once the cash has been withdrawn from a pension and the tax has been paid (deducted by the pension provider before the money is handed to the investor), it will be too late. The pension providers will be required to alert investors to the fact that tax will be deducted however even now, with just 12 weeks to go, no formal guidance has been issued on how pension providers should actually go about this.
“Once the cash has been withdrawn from a pension and the tax has been paid (deducted by the pension provider before the money is handed to the investor), it will be too late. The pension providers will be required to alert investors to the fact that tax will be deducted however even now, with just 12 weeks to go, no formal guidance has been issued on how pension providers should actually go about this.”
Hargreaves’ Top 10
- Fraudulent investment schemes targeted at the over 55s
- Unexpected tax bills
- Final salary scheme members give up valuable guarantees
- Investors’ pension pots run out too soon, because they have underestimated life expectancy or withdrawn capital during market downturns or because investment returns fail to meet expectations
- Investors overestimating state benefits
- Pension guidance service unable to cope with demand
- Investors buy poor value annuities
- Pension schemes which aren’t ready in time
- Pension investors don’t draw their money quickly enough
- Pension investors withdraw money unnecessarily
