Financial watchdogs have closed 18 pension liberation web sites and arrested seven financial advisers as part of a crackdown on alleged retirement fraud.
Table of contents
The closures are part of The Pension Regulator’s ‘pensions predators’ campaign against firms offering to unlock pensions before retirement savers are 55 years old.
Some pension liberation schemes have resulted in victims losing their entire pension pots to fraud or left them paying high tax and administration charges that can take up to 85% of their retirement savings.
The regulator claims around £500 million has been switched into pension liberation schemes by unscrupulous advisors taking fees of up to 30% of the transferred fund.
On top of this, HM Revenue & Customs (HMRC) charges a 55% tax penalty for unauthorised withdrawal of the fund by the retirement saver.
Unethical and fraudulent
Pension minister Steve Webb said: “Schemes promising quick access to pension cash are obviously tempting to retirement savers with financial problems, but before anyone agrees to sign over their hard-saved cash they should understand the consequences.
“The government and pensions industry regards liberation as at best unethical and at worst, some of the schemes amount to fraud.
“The offers are not value for money and I advise anyone approached by one of these firms to take independent advice before action or to stay away from them.”
Andrew Warwick-Thompson, of The Pension Regulator, explained the watchdog is working hard to frustrate liberation operations.
“Some savers have lost all their pension cash after transferring their money. If you move your money into a pension liberation scheme, you could end up with nothing for retirement and will not be able to chase compensation”
Meanwhile, as part of the ‘pension predators’ campaign, HMRC has tightened up the rules for setting up a pension scheme in order to thwart liberation advisers.
More than 4,530 applications to open new pensions have been sent to HMRC since October 2013 – with 360 rejected mainly as liberation schemes and another 181 under investigation as fronts for pension liberation.
HMRC explained new powers allowed them to vet pension schemes in more detail and that additional powers in the pipeline will stop suspected pension liberation advisers from involvement in the industry as they will have to pass a ‘fit and proper’ person test.
“Registering a pension is becoming harder and will become even tougher when the new power comes in,” said an HMRC spokesman. “We’re sending a clear message that pension liberation will be stamped out.”
Related Articles, Guides and Insights
Below is a list of some related articles, guides and insights that you may find of interest.
Questions or Comments?
We love to get feedback from our readers. So, after reading this article, if you have any questions or want to make comments, send us a message on this site or our social media?
Don’t forget that you can also request the guides sent directly to your email inbox.