pension scams uk

Playing by the rules: What is Pension Liberation Fraud?



Posted on: 3rd October 2019

Pension liberation fraud can happen when you attempt to transfer your pension benefits to an unregulated scheme before you turn 55. Those who offer these opportunities tend to refer to them as ‘pension loans’ and offer cash incentives to sign over your pension benefits.

When is pension liberation considered fraudulent?

If you are in ill health, you may be able to access your funds before age 55 from your current pension scheme. However, for the majority of individuals, accessing this money early is normally hocus and will likely result in serious tax consequences. HMRC will view early access to your pensions as unauthorised payment which is subject to high tax charges and cannot be reclaimed. These charges can be anywhere between 55 and 70 per cent of the pension pot.

Pension liberation becomes fraudulent when you are not made aware of the potential tax consequences and when some or all of your money cannot be located.

If you find that you have fallen victim to pension liberation fraud, you will also face transfer fees from your pension in addition to the high tax charges. These fees can be at least 20 per cent of your pension savings and the chances of recovering them are slim.

Warning signs

Here are some warning signs that you may be targeted for pension liberation fraud:

  • You are contacted unexpectedly either over the phone.
  • The advisers you speak with are pushy, unregulated and claim they can help you access your pension before age 55.
  • You are offered a ‘loan’, ‘saving advance’ or ‘cashback’ from your pension.
  • The words ‘loopholes’, ‘overseas investments’ or ‘creative or new investment techniques’ are mentioned.

Be alert for these types of offers and, if in doubt, speak with a regulated financial adviser. If you think you have been made an offer, be sure to get in touch with Action Fraud on 0300 123 2040 as soon as possible.

How to avoid pension liberation fraud

There are many things you can do to avoid liberation fraud. For one, you should always check that anyone who gives you financial advice is approved and regulated by the FCA. You should also ask the scheme that you are transferring from to check the new scheme’s HMRC registration. They will be able to tell if the scheme is legitimate or not. Finally, if you find yourself being pressured into making a decision, say no. Do not continue with the transfer unless you are absolutely certain your money will be safe because once you transfer, there’s no going back.

Where can I find out more?

If you still wish to learn more about pension liberation fraud and how to keep yourself safe, it is best advised that you speak with an independent financial adviser. This will help you make the best decisions for your pensions and your financial future. If you are based in Greater Manchester and would like to speak to someone about your pension savings, get in touch with Haven IFA today.