Consumers have been urged to steer clear of offers that claim to be able to provide loans or release tax-free cash from people’s pension pots before they reach the age of 55.
The Pensions Regulator, the Financial Services Authority (FSA) and HM Revenue and Customs (HMRC) issued the warning on 25 February after detecting an increase in these schemes, with funds of nearly £200 million known to have been transferred by the end of 2011.
They urged individuals not to be taken in by website promotions, cold calling or adverts encouraging them to transfer their existing occupational or private pension to a new arrangement in order to access a cash payment or loan.
These schemes usually work by transferring some of the member’s pension fund into investment structures, which are often based overseas, with no guarantee that members will get their money back if something goes wrong.
Victoria Holmes of the Pensions Regulator said: “These offers are typically advertised on websites or small adverts in newspapers. If the offer sounds too good to be true, it probably is. It may simply be a scam designed to get hold of your money.
“Transferring your pension to one of these questionable investment models could result in you losing your entire pension.”