Someone always wants to get rich quick the easy way – and financial experts are warning pension liberation scammers have invented new tactics to try and fleece retirement savers.
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Pension liberation firms focus on greed by offering pension savers what seems the answer to their dreams.
That dream is usually more money to fund a more comfortable retirement. The means is switching pension savings from an established financial firm to the liberation scam.
The latest tactic is cold-calling savers to suggest they can make more money from their savings by taking the cash from their pension and investing overseas.
Popular investments are hardwood tree plantations, setting up farms in third world countries and putting the money into green carbon credit schemes.
Costs of pension liberation
The problem is pension liberation is not illegal, but the scammers forget to mention a few pertinent facts:
- HM Revenue & Customs (HMRC) will charge at least a 55% tax penalty on any funds withdrawn from a pension before the saver is at least 55 years old
- The scammers charge a fee of between 20% and 35% of the pension transfer fund
- The overseas investments they promote are extremely risky and can result in a saver losing all their money – and at worst the liberation firm disappears offshore with all the cash
- The investments are outside financial protection schemes in the UK, so investors have no recourse to the Financial Ombudsman or Financial Services Compensation Service if the investment goes wrong
Standard Life’s head of corporate strategy and propositions Jamie Jenkins explained pension scammers are quick on their feet to take advantage of recent pension rule changes announced by Chancellor George Osborne in his Budget 2014.
“These guys have stopped talking about early access to pensions and now call themselves overseas investment advisors,” he said.
“They claim that the profits someone can make overseas make up for the tax bills they will pay in the UK for taking the cash out of their pensions.”
Transferring a pension from company to another for a better deal can sometimes make financial sense, said Margaret Snowden, who heads the Pensions Liberation Industry Group an industry watchdog.
“The trouble is talking about good and a bad investment is difficult,” she said. “But moving all your money from a relatively safe pension into a risky overseas venture would not seem sensible.
“Pension liberation is self-serving. The aim is not to help the consumer but to take their money as fees or to spirit away all the funds.”
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