FSA issues pension scheme warning

The FSA is set to issue a warning to cash-strapped consumers to be wary of schemes that offer the chance to release up to 50 per cent of their pension funds before they are 55.

Under normal rules this is not allowed and would trigger an "unauthorised payment charge" from HMRC of 55 per cent of the amount released. However, some companies claim to have found a way around this legislation.Usually only those who are terminally ill or have to retire early because of health problems can access their pension fund early. The FSA is urging anyone thinking of using such schemes to tread carefully.Kevin Still, director at Atlantic Financial Management, said: “Early release of funds from your pension is already considered a high risk advice area by the FSA. With the retirement age being raised from 50 to 55 from April 2010, it is inevitable that new ‘schemes’ will emerge to test current legislation. These schemes will invariably be targeted at homeowners in financial difficulty or suffering ill-health and are unable to continue working.“Any such decision should not be taken lightly and you should consult a specialist FSA authorised pension advisor before you look to unlock your pension. Taking any pension benefits early is likely to reduce your income at retirement and pension release is only suitable for a very limited number of people and should not be seen as an easy option for raising cash.If you have debt problems then calling a DEMSA member like Atlantic Financial Management may allow you to assess the alternative debt solutions available to you before considering looking at higher risk strategies that may have a long-term impact on your personal finances and funding for your retirement. The updated Lending Code that came into effect in March 2011 makes considerable provision for financial hardship and people with health problems which affect their ability to pay their debts.”
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