A LEADING figure in the financial advice industry locally has added his voice to the warnings that people should act carefully over the new pension ‘freedoms’.

Financial firms nationally have said there was no ‘mad rush’ for their cash after the new flexibilities came into force, allowing people to access cash from their pension pot rather than draw an annuity.

Kevin Forbes, chairman of the Hampshire and Dorset region of the Personal Finance Society, said people should be cautious of scams.

He said many people surfed the web looking for relatively modest increases in interest on their savings, yet paid little attention to retirement planning.

“This, we believe is down to two main problems. Firstly pension legislation is a political hot potato and gets changed all the time, making it extremely hard to understand what is going on.

“Secondly, not enough people use a regulated financial adviser to help them deal with the more complicated aspects of personal finance,” he said.

He warned the pension reforms could present an opportunity for scammers as well as the risk of making ill-advised decisions.

“Many people have spent many years accumulating funds to ensure they have a more comfortable retirement, yet risk throwing it all away at the last minute by not taking enough care,” he said.

Mr Forbes, who a partner in Poole-based Strategic Solutions Chartered Financial Planners, cited some hypothetical cases of people reaching retirement age:

* A 65-year-old with a pension of £135,000 (around four times the average pot), wanting to take it all out straight away, would find himself with £108,250 of taxable income in the first year – a bill of £34,553. By spreading the withdrawals over four years, his tax bill would have been halved.

* A 66-year-old with a pension pot of £266,667, advised by a friend to take it all out and buy a rental property, would be taxed on £200,000 of it, leaving him with only £187,374 – and he would be taxed on part of his rental income. If he drew out just five per cent of the pot a year, he would have had an income of £19,053 a year without having to become a landlord.

* A company director with a modern pension plus an old ‘frozen’ scheme worth £20,000 might cash that in and walk away with £17,000 to spend while continuing to contribute £20,000 a year to his new scheme. But the new rules limit tax relief on pension contributions to £10,000 a year, so he would face a fax bill for his excess contributions and would be limited to paying £10,000 a year into his pension.

Mr Forbes added: “Unfortunately, we are already hearing of many new instances of unregulated schemes setting up trying to prize hard-earned and hard-saved pension money away from the general public. These ‘scammers’ will look to lure money into unregulated schemes in order to entice money in, then likely rip everyone off and run away into the distance.”

KEVIN Forbes suggested some common tactics used by pension scammers;

* A cold call, text message, website pop-up or someone coming to their door offering a ‘free pension review’, ‘one-off investment opportunity’ or ‘legal loophole’

* Convincing marketing materials that promise someone returns of over eight per cent. No regulated adviser is allowed to quote above eight per cent as any part of a projection of returns.

* Paperwork delivered to their door by courier that requires immediate signature.

* A proposal to put their money in a single investment. In most circumstances, financial advisers will suggest diversification of assets.

* Claims that they can access your pension before age 55.

* Transfers of their money overseas

A free, impartial Pension Wise service is being delivered face-to-face by Citizens Advice, on the phone by the Pensions Advisory Service (TPAS) and online by the government.