Property expert Simon Morris recently spoke out to explain how investors can ensure that they invest their lump sum pensions in profitable investment deals.
Evidence from one of the UK’s leading pension providers, Standard Life, suggests that UK consumers have already taken advantage of the government’s recent pension. Data indicates that as of June 2015, 10,000 Standard Life customers had utilised pension reforms; 80% of which completely cashed in their defined contribution pensions, according to the Financial Times.
According to Citizens Advice, some firms are capitalising on the strong levels of pension equity release to persuade people to enter investment schemes. It said that some are taking on the role of Independent Financial Advisers (IFAs) to supply people with free pension reviews. They use this as an opportunity to ask people to take part in fine wine and property investment deals that may not suit their financial circumstances.
This has facilitated the rise of a range of websites which aim to persuade investors to place their funds into property and fine wine. These platforms often indicate that investors can reap 12% – 15% long-term average returns per annum. Pension advisory company, Portal Financial, has recently explained at least 11 of these websites have been submitted for removal from Google this year.
Steps investors should take
Explaining how investors can make sure they choose profitable investment deals, Simon Morris commented: “I would suggest people to act sensibly. They should never reveal their financial information to a cold caller, or engage with a company that wants to conduct a free pension review in their home.
“They should also always check that companies or websites offering investment products are authorised by the Financial Conduct Authority (FCA). If, for example, a product’s returns sound too good to be true, they probably are, and advisers offering these unrealistic returns aren’t usually registered with the consumer protection body.
“The best way to determine the true value of an investment product before releasing pension funds is to seek independent advice through an IFA. The role of an IFA is to refer financial products that best suit an investor’s expectations regarding yield and appetite for risk. However, investors should check that their IFA is authorised to give financial advice by the FCA, before following any recommendations they issue.”
Explore full range of financial products
He was quoted by HBD Online continuing: “As a general rule, investors should also explore a full range of financial products with the help of an IFA, before they invest. They may find, for example, that they can secure stronger returns by forgoing a bricks and mortar property investment in favour of property bonds, investment funds, and products that can invested within an ISA wrapper. These investment vehicles can provide tax advantages, whilst some products even guarantee initial investment.
“If a company advises an investor to invest in buy-to-let property; this is a case where investors should do their research. There is an element of risk attached to investing in buy-to-let, which means that it may not be the best investment strategy for every investor’s circumstances.”