The Financial Conduct Authority (FCA) is reminding customers of the risks of transferring their defined benefit (DB) pensions to a new scheme.
In an alert at its website, the regulator lays out a series of questions consumers should consider before moving their pension pot, such as if this decision is being prompted by an unsolicited call, email or text.
Savers should also question the type of scheme their money is being transferred too, and if it is going to be invested in unusual investments such as overseas property, forestry, storage units, care homes or biofuels.
The regulator also raised a red flag on offers of so-called 'free' pension advice.
The FCA said: “Free pension reviews are designed to persuade you to move money saved in an existing pension pot to a new scheme.
“Chances are your money will be invested in something that is either very risky or a scam.
“Professional pension advice is not free. Professional advisers looking to act in your best interests are very unlikely to cold call you offering their services.”
The regulator warned consumers to always check if the firm providing advice is authorised, and has permission to give advice on pensions.
The FCA suspended recently Active Wealth, a financial adviser firm which gave advice on DB pension transfers to members of British Steel Pension Scheme (BSPS).
FTAdviser reported last week that several steelworkers appear to be transferring out their pensions after being lured by cheap deals by an introducer firm called Celtic Wealth Management & Financial Planning, which, because it is unable to give advice, then referred these clients to Active Wealth.
Several sources have said Celtic has been present at several roadshows from the scheme trustees, which are attended by members wanting more clarifications about their pensions and proposing to them a flat fee of £1,500 to arrange their DB transfers.
The FCA alert does not name Active Wealth or Celtic Wealth Management in its alert and there is no suggestion the update is related to their activities.
However the watchdog reminded consumers that some of the investments being proposed through cold calling “are badly run, while others may be outright scams”.
The FCA said: “You could lose some or all of your pension pot. Even if the investment is reasonably well run, unusual investments tend to be unregulated and high risk.
“Returns are not guaranteed, it is generally difficult to have access to your money, and all your money is at risk.”
Also, since most of the companies making these offers are not authorised or regulated by the FCA, consumers “may have no right to complain to the Financial Ombudsman Service or to claim compensation from the Financial Services Compensation Scheme if things go wrong”.
The watchdog added that “for most individual investors, investing their pension savings in unregulated investments is unlikely to be in their best interests”.