Money matters: Pensions freedom opens doors to scammers
The biggest problem with the new pensions freedoms is the risk of crooks and scammers.
They have already been busy trying to tempt people out of their retirement savings, and they are likely to get even busier next week. Indeed, some people feel they have already been victims of pension scammers.
Recently, I reported the plight of reader Michael Williams, who was advised to take out a pension mortgage.
Like today's potential pension victims, he has faced serious financial detriment because of following the wrong advice. And like today's potential victims, he is probably only one of many facing financial disaster.
What was his mistake? He trusted someone who suggested he link his mortgage to his pension. His financial woes have led him to the near certainty that he will lose his family home. Because of the severe under-performance of his pension fund, he doesn't have enough cash to pay off his mortgage and will have to sell.
He's been let down by advisers and regulators because of an anomaly: if he had started his pension-mortgage after August 1988, when laws changed, he would probably have been in line for compensation.
"I thought I was making sensible provision for clearing my mortgages and having a pension, but I ended up with a huge shortfall," he says.
"Like many others, I suspect, I have had to extend my working life, but fell foul of the tax laws again when I tried to draw some of my pension money to try to offset the mortgage debt.
"I discovered it is lumped in with earnings, creating a huge income tax bill and therefore defeating the whole point of it."
Does that sound familiar? Anyone attempting to cash in their pension pot could face a huge tax bill if they don't tread carefully.