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Fact Sheet – Pension Liberation Scams

Thinking of taking 100% of your pension in cash, before the age of 55?

Consider this information first!

Watch out for pension scams!

At the 2014 Budget in March, Chancellor George Osborne announced that anyone with a pension would soon be able to cash in the full amount at retirement. He didn’t actually go into much detail at the time, but anyone who read the small print would soon have noticed that these withdrawals would be taxed at the pensioner’s marginal income tax rate. So anyone taking out a substantial sum would end up paying the highest current rate of tax of 45%.

Unfortunately, the second part of his message hasn’t got through to everyone. It would appear that the budget announcement has given pension fraudsters a new opportunity. Pension liberation fraud has been around for some time now. Typically, they would make an unsolicited phone call offering to help you get early access to your pension money. Should you agree to transfer your pension to their scheme, you will be charged a large fee and receive your cash. You can then expect contact from HM Revenue & Customs to charge you with a 55% penal rate of tax on the entire amount as the normal rate charged on unauthorised withdrawals. The Independent on Sunday reported of one individual who took out their £150,000 pension pot in this manner to repay debt. After paying almost £100,000 in fees and tax, they actually received only £52,500 in cash.

Some of the pension liberators act just about within the law. So don’t get caught in the trap of “liberating” your pension to take all of the cash now and pay 55% in tax, when it is highly likely that from April 2015 you can take 25% tax free and the rest of it at as a lump sum taxed at your marginal income tax rate. Whether these liberation schemes are within the law or not, these “liberators” are clearly increasing their marketing activity before the new rules render their fraud irrelevant.

!! Please beware of any company promising you that they can release 100% of your pension, especially if you are under the legal minimum retirement age of 55. Please beware of random texts or cold calls targeting your pension. It is advisable to check that the company you may use to assist with your pension is a regulated firm listed on the Financial Conduct Authority (FCA) register. If they are not there, don’t use them. Also, watch out for disclosure of the fees and charges you have to pay. If it is not clear to you how much you are being charged, it is likely to be some sort of scam. This guidance is not just for pension related products, but for all financial products on the market.

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