Advice on pensions freedoms poor, says financial watchdog

THE City watchdog has issued its “gravest warning yet” over cashing in finalsalary pensions after it found financial advice being given was incorrect.

The Financial Conduct Authority (FCA) found one in five recommendations was unsuitable, advising transfers that would leave savers worse off.

Advisers were making poor recommendations based on insufficient information about saver objectives, needs and circumstances, the FCA said. In many cases the money being moved was larger than the value of savers’ homes and nearly all their cash wealth.

In its efforts to prevent scams, the FCA has banned four firms from advising on transfers so far this year; a further 16 have ceased making transfers.

People are increasingly using Government pension freedoms to swap a guaranteed income provided by finalsalary pensions for flexible pensions effective giving them a cash machine.

Nathan Long, senior pension analyst at Hargreaves Lansdown, said: “The starting point for anyone with a defined benefit pension should be to assume it is best left as it is.”