An end to pension deception

NEW rules will protect workers from being duped out of lucrative final salary pensions. An estimated 750,000 workers have abandoned final-salary pensions after receiving a cash bribe from their employer.

Typically, they are offered thousands of pounds to transfer their savings to a stock market-based pension.

But the benefits of switching are often exaggerated — leaving workers worse off in retirement. Now the City watchdog Financial Services Authority (FSA) wants all workers to receive advice that is in their best interests, not their employer’s.

‘We know many people are persuaded to opt out of their final salary pension though it will leave them much worse off,’ says Tom Mcphail, pension expert at adviser Hargreaves Lansdown. ‘Hopefully, these new rules will make it clearer exactly how much income they are giving up.’

Companies are increasingly convincing workers to leave final salary schemes because they are expensive to run and many have huge liabilities.

The FSA wants all advisers to take into account up- to- date life- expectancy figures, annuity rates, inflation-linked pension increases and investment growth when explaining how much workers can expect to receive from a stock market pension.

The FSA hopes to have new rules in place by the end of the summer.