Warning for savers over pension cash bonuses that could leave you £1,000s worse off

Scottish Sun

19 hours ago

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THOUSANDS of savers have been warned against moving their pension to a new provider in order to get a cash bonus.
Some firms offer free cash payments of up to £4,100 to encourage customers to move or combine their pensions with them.
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The regulator has warned that customers are being lured into changing their provider with short-term cash bonuses
Credit: Getty
But pension savers are focusing on these short-term rewards rather than the full financial implications of their decision, the Financial Conduct Authority (FCA) said.
The Sun had previously warned of the danger of these cash bonuses as often they can tempt savers to switch their pension to a provider with higher fees.
This can eat into their pension returns in the long term.
The regulator added that pension firms have made an effort to flag the benefits of their existing scheme to customers.
The regulator said that pensions dashboards will make it easier for customers to track their pensions.
The dashboards will allow customers to see all of their pensions and balances in one place.
This may also increase the number of people who want to combine their pension pots, the regulator said.
The research was published as part of the FCA's review of life insurers' pension transfers.
The regulator said on its website: 'We expect firms to be resourced with sufficient, well-trained staff to service the products they have sold or acquired and be able to respond to foreseeable spikes in demand.'
Under Consumer Duty rules, firms need to put customers' needs at the heart of what they do.
The FCA said it expects firms to support customers in making informed decisions.
This means they should make sure they give customers enough information when they communicate with them.
The FCA's website said: 'Our findings suggest that firms are well-intentioned and seek to ensure consumers receive good outcomes when transferring their pensions.'
Jon Greer, head of retirement policy at wealth manager Quilter, said: 'The FCA has said it is concerned that consumers are transferring their pension provider simply to take advantage of an immediate or near-term reward or incentive.'
He said cashback for pension transfers 'could be a very tempting offer' for many people.
He continued: 'However, many consumers will be unaware of the benefits their existing pension arrangements may have, and that by transferring you automatically give these up.
"This can include a higher tax-free lump sums or the earliest age you can access benefits – it all depends on the terms of the scheme."
He added that although the FCA suggests that firms are doing what they can to provide that information to customers' looking to transfer their pensions, it is still an uphill battle to get people to engage with them.
Common pension mistakes to watch out for
YOUR pension can help you to build a substantial nest egg for your retirement.
But you may end up with less than you think if you fall for common pension mistakes.
Almost a fifth of people do not know how much money is going into their pension, according to a recent Hargreaves Lansdown study.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said this means you are less likely to know if you are on track when saving for retirement.
She said: 'Take time to check what is going in and see if you can afford to boost the contribution. Even small increases over time can make a big difference.
'If you can't afford to pay more in right now then it's worth checking back next time you get a pay increase or a new job.'
Check how much your employer will match your pension contributions, she advises.
'Not taking the time to check can see you miss out on money,' she said.
'Some employers will operate what is known as a matching contribution, where they will boost their contribution if you boost yours.
'This can mean a lot more goes into your pension with only a relatively modest uplift from you.'
Make sure you track down missing pension pots you may have lost when you changed job or address.
Around three million pensions have been lost, according to the Pensions Policy Institute.
Helen said: 'Even relatively small pensions can grow over time, and you could be missing out on thousands of pounds.
'If you think you've lost track of a pension then contact the government's Pension Tracing Service.'
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