Pension scheme members could see £1bn of their pension cash moved to firms who are singling them out and claiming that they can help them get at their pension cash early this year.
So far it is estimated that £600m has gone to ‘Pension Liberation’ schemes so far – but numbers of transfers are rising.
With people under pressure trying to pay mortgages, loans, credit card bills and everyday living expenses demand for early access to pension savings continues to rise.
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 the age of 55 .
Accessing pension cash before 55 is not necessarily illegal but there can be a very big tax bill which members are not told about as well as very high charges/commission taken out byhe 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.