Pension scheme members are being warned that predatory companies are singling them out and claiming that they can help them get at their pension cash early.
As more people have come under pressure trying to pay mortgages, loans, credit card bills and everyday living expenses demand for early access to pension savings is going up.
There is also evidence that more people are being duped into transferring their pension funds to rogue pension arrangements.
Pension liberation, also known as ‘pension loans’ and ‘pension scams’, see a member’s pension savings transferred to an arrangement that will let them get at their funds before they are entitled to receive them.
This activity can be fraudulent where members are not informed, or are misled, about the consequences.
After these type of frauds doubled to nearly £400million last year the Pensions Regulator says: “We call this activity ‘pension liberation fraud’ and members who agree to it could face a tax bill of more than half the value of their pension savings.
“In some cases these arrangements appear to operate within the letter of the law, but they can still attract large tax charges and further penalties. Some are outright illegal.
“Most of the time, people targeted by these scams are not informed of potential tax consequences. Only in rare cases, such as terminal illness, can members take a pension before age 55.”
Other agencies tackling the problem include the Serious Organised Crime Agency, Serious Fraud Squad, National Fraud Intelligence Bureau, Financial Services Agency, Action Fraud, HM Revenue and Customs and the Pensions Advisory Service.
Even if these authorities take action on a suspect scheme a members transfer value, when refunded, could be minus an ‘admin fee’ and tax charges and penalties resulting in a loss of up to two thirds of the value.
Pension predators promise to release pensions before time as a loan or lump sum but often move the bulk of funds transferred into highly dubious, risky, unregulated investment structures often based overseas.
Liberation schemes entice members via ‘spam’ text messages, cold telephone calling and website promotions saying pensions can be released before the age of 55.
If you are a pension scheme member and you’re concerned that you may have been targeted by pension liberation fraud, contact Action Fraud on 0300 123 2040. Further information is in a pension liberation awareness leaflet (PDF) on the Pensions Advisory Service’s website.