The Financial Conduct Authority (FCA) is reminding customers of the risks associated with transferring their defined benefit pensions to a new scheme.
In an alert on the FCA website the regulator advises consumers to ask a series of questions before moving their pension savings.
One such question requires them to identify whether their decision has been influenced by an unsolicited call, email or text message.
The FCA also recommends that pension savers thoroughly research the type of scheme they’re about to move their money to.
There have been numerous cases in recent years where financial advisors have mis-sold unsuitable pension products to savers, often resulting in the loss of thousands of pounds in savings.
In some cases, savers have been advised to invest in overseas property, forestry, storage units, or care homes. Other savers have been given little to no information when it comes to the location of their pension pot, with many people assuming their advisor knows best and failing to do any further research themselves.
The FCA also warned consumers to be wary of pension advice that’s advertised as “free”.
A spokesperson said: “Free pension reviews are designed to persuade you to move money saved in an existing pension pot to a new scheme.
“Chances are your money will be invested in something that is either very risky or a scam.
“Professional pension advice is not free. Professional advisors looking to act in your best interests are very unlikely to cold call you offering their services.”
The FCA has also urged savers to ensure the firm they’re obtaining advice from is authorised and has permission to give pension advice.
Earlier this year the Personal Finance Society encouraged the regulator to launch a full investigation into the pension transfer market following an initial review that found less than half of advice given to those considering cashing in their final salary schemes was “suitable”.
Final salary and defined benefit pension schemes typically provide pension holders with a secure income for life. The exact amount is usually based on salary and length of service.
But over the past two years, an estimated £50bn has been moved out of company pension schemes. In many cases, this money has been moved into schemes that are unreliable, high risk or unregulated. There have also been instances where savers have fallen victim to scams that have depleted their pension savings completely.
The FCA said: “You could lose some or all of your pension pot. Even if the investment is reasonably well run, unusual investments tend to be unregulated and high risk.
“Returns are not guaranteed, it is generally difficult to have access to your money, and all your money is at risk.”