May 2024

Ten worst money mistakes. 5. The “switch and get rich”

If you or anyone you know is saving for a pension, please watch out for this trick as it will make you an awful lot poorer. It goes like this: A financial adviser or pension company suggests that you should take your money out of an older pension scheme and put it into a newer one. Usually they will argue that many older schemes are expensive and underperforming, whereas newer schemes have lower fees and should do better. Hundreds of thousands of people have fallen for this trick. If you’re say fifteen years from retirement and you switch, your adviser will pocket almost a quarter of your savings in commission. You switch, they get rich! A study done by the FSA of hundreds of people advised to switch could not find a single example where it was actually in the customers’ interests to switch – it was only in the financial advisers’ interest.

If you really are unhappy with your current pension company, you have two choices. 1. You can just stop saving with that company and start with a different one. 2. If you really want to switch there are only three or four short documents which need your signature and the company receiving your money will usually be happy to guide you through these. So do it yourself and then there’s no need to hand over up to a quarter of your money to any adviser.

Please do not let yourself or anyone you know be caught by the “switch and get rich” trick.

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