FCA warns retirees at home and abroad about free pension advice

The UK’s Financial Conduct Agency watchdog has delivered an uncompromising warning that ‘free pension advice’ is nothing but a scam.

The government agency policing financial services in the UK is aiming its warning to retirees planning to move their pension pots out of a defined benefit scheme. The alert was issued in order to define the risks involved in free pension advice, whether the recipient in planning to stay in the UK or retire overseas. UK pensioners already living abroad should also take note, as scammers are targeting popular European and Asian retirement destinations.

Nowadays, many older Brits are considering retiring outside the UK, for reasons varying from better weather, more enjoyable lifestyles, affordable property and less expensive private health care to a lower cost of living. Those with direct benefit/final salary pensions are now able to transfer their pension savings to an offshore location in the form of a QROPS, but pension freedoms have opened the door for a massive influx of bad advice at best and pension frauds at worst.

Following the introduction of pension freedoms, unscrupulous, unregulated financial advisers took to the internet in huge numbers, uploading websites promising free pension reviews to those about to retire. Qualifications were often faked, and poorly run or even totally spurious long-term pension investments were pushed to elderly consumers with little or no knowledge of financial terms and obligations. The scammers made fortunes on commissions, with their clients losing much or all of their pension savings.

According to the FCA, warning signals of a scam or a direct fraud include unusual investments promising unrealistically high returns. The list is long, and includes fine wines, tropical forests, storage units, carbon credits and suchlike, all of which are unregulated and most of which are now defunct, losing retirees their entire pension pots in many cases. Other so-called investments have proved to be deliberate scams introduced by cold callers offering the ‘deal of a lifetime’.

As pointed out in the FCA’s warning, professional and correctly regulated financial advice is never free, and those offering it are not about to cold-call retirees and offer their services or set up fraudulent websites. The vast majority of IFAs in this marketplace are unauthorised by the watchdog, meaning pension savers who’ve been caught in their webs have no redress and no right to complain to the UK’s Financial Ombudsman service, nor can they apply to the Financial Services Compensation Scheme once they find they’ve been cheated.