The Financial Services Authority (FSA) has issued a warning to consumers about the dangers of pension loan schemes.
We published a blog warning about these schemes on 20th May, after receiving a number of emails from firms making claims about being able to unlock pension benefits early.
The FSA warning urges people to treat these schemes with extreme caution.
Using a pension loan scheme, sometimes promoted as a pension reciprocation plan (PRP) could be extremely damaging to your wealth.
In addition to the scheme charges, there are serious investment risks and also the risks of dealing with an unregulated firm or individual, which results in no protection under the UK financial services regime.
The schemes we have looked at tend to be connected to non-UK property investment salespeople. They have high charges and no guarantee that they will avoid punitive tax penalties from HMRC.
We suspect that this is not the last word on these schemes from the FSA.
They explain in their warning to consumers that they are working closely with HM Revenue & Customs and The Pensions Regulator to better understand how these pension loan schemes might be taxed and regulated.
Where unauthorised firms are providing financial advice to UK consumers, they are committing a criminal offence and we would expect to see the FSA take a tough line on the distributors of some of these schemes.
Photo credit: Flickr/basibanget
