Gold-plated pension cash-ins are too big, says regulator

PENSION cash-ins could be under threat as watchdogs have warned struggling companies that the lump sums they are offering savers may be too big and should be revised down.

It comes after savers with so-called “gold-plated” pensions, which promise an income for life, have been offered the chance to swap their retirement salary for record cash lump sums.

For a £10,000-per-year pension, savers are typically offered between £250,000 and £300,000, however the amount can be as high as £400,000.

A letter sent by the Pensions Regulator to 14 defined benefit pension schemes warns that these payouts may be unsustainably generous, as there may not be enough money left to pay for other people’s pensions.

It was obtained by Royal London in a Freedom of Information request.

The letter also warns schemes that savers looking to cash in their pensions may be preyed upon by rogue financial advisers. Earlier this year, the Commons work and pensions select committee warned of “vulture” advisers preying on the 100,000 savers who cash in gold-plated pensions annually.

But since then the number of retirees cashing in such pensions has slowed dramatically amid fears that savers are being given bad financial advice.

A spokesman for The Pensions Regulator said: “Transfers from defined benefit schemes to defined contribution schemes are unlikely to be in the best interests of most members, although there are certain circumstances where they may be appropriate. Our primary concern is that DB scheme members requesting a cash equivalent transfer value have all the information they need to make an informed decision about what is in their best interests.”