Pension savings risk warnings

With flexible access, your income isn’t guaranteed to last forever. So if you take too much money, live longer than expected or if your investments don’t perform as well as you'd hoped, you could run out of money before you die.

You may notice that your shopping today costs a little more than it did a year ago – and probably a lot more that it did 10 years ago. This is down to inflation.

When prices go up, it can eat away the value of your retirement income – meaning your money won’t go as far tomorrow as it will today. This means you have a higher chance of running out of money, as you may need to take a higher income to cover the effects of inflation.

The government will let you earn a certain amount each year before you pay any tax. This is called your ‘personal allowance’.

Generally speaking, any income you take over and above your personal allowance will be taxed at your normal rate. However, if HM Revenue and Customs (HMRC) don’t have the right tax code for you, you could pay more tax. You may be able to reclaim any emergency tax by visiting the HMRC website and completing the relevant online form.

You should also be aware that taking large amounts from your plan could push you into a higher income tax bracket. So you’d give more of your hard-earned savings to the taxman.

Tax rules depend on individual circumstances and may change.

If you’re planning to re-invest the money you take from your pension, you should be clear on whether you'll be charged for doing so. You should look at any charges closely and see how they compare with what you'd be paying to keep your money where it is.

It's also a good idea to weigh up the potential returns you could get on your new investment against the risks you'd need to take to achieve them.

Remember, the value of investments can fall as well as rise - meaning you could get back less than you started with.

The amount of income you take from your savings could affect your entitlement to means-tested state benefits.

This means if your income or any money you have in the bank rises above a certain level, it could affect your eligibility to certain things like housing benefits and council tax reductions.

When you’re able to access your pension savings, there will be criminals who are eager to get their hands on your money.

So if you’re planning to take cash out of your pension to give to someone or to invest somewhere else, you need to tread carefully. You could lose everything if things turn out to be fraudulent.

If you’ve been advised on what to do with your pension savings, you should always check that person is registered with the Financial Conduct Authority.

You can do this by visiting register.fca.org.uk.

Most people who have lost their pension savings in a scam were first contacted by a cold call from a scammer. A cold call is when someone you have not previously agreed to accept calls from phones you to talk about transferring or taking your pension savings.

Unsolicited calls from people or companies promoting pension transfers or cashing in your plan are illegal. You could lose your pensions savings if you transfer or take your benefits after being contacted by these cold callers.

For more information on how to spot pension scams from cold callers, please visit the FCA's ScamSmart webpage.

If you’re in debt, either now or in the future, the individuals or companies you owe money to can make a claim for your pension savings when you take an income.

While the money remains in the protective environment of your plan, it can’t be touched by anyone else.

Please give us a call on 0345 850 8953 if you’d like to discuss this further.