Pensions 'liberation' scam tops £400m

Middle aged couple Do not be tempted to release money from your pension fund before the age of 55, regulators say

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The pensions regulator says individuals have given illegal "pension liberation" schemes an estimated £400m since 2008.

The schemes offer to give people early access to their pension funds.

They involve transferring the pension pot from a legitimate scheme to one set up by the "pension liberation" company.

But Bill Galvin, chief executive of the Pensions Regulator, has told BBC Radio 4's Money Box programme tax charges and unregulated investments abroad could leave little pension behind.

Costly transfers

Legitimate pension schemes are normally under a legal duty to transfer a pension to any scheme which is registered with HM Revenue and Customs and the Pensions Regulator.

But Mr Galvin said if a legitimate scheme was worried about where the money was being transferred to, there were different options available.

Start Quote

We have shut down over the last 18 months a number of vehicles”

End Quote Bill Gavin Chief Executive, The Pensions Regulator

"There are circumstances in which we will support them in a decision to delay or not to transfer monies where they have certain suspicions," he said.

The regulator said challenging economic circumstances were tempting more people under 55 to attempt pension liberation.

It warned people to beware of unsolicited phone calls or emails offering the service, especially if they were being pressurised to act quickly.

It said sometimes bankruptcy lists were being scanned to find suitable victims as well as those of people in occupational pension schemes.

Tax implications

Signing up can often be disastrous. If someone has a pension pot of £20,000, schemes may offer them access to half of that.

The scheme will take a commission of around £4,000 - 20% - leaving the victim £6,000 in their pension fund.

That is often invested in offshore vehicles and might never be seen again. The individual will also be obliged to pay tax of between 55% and 70% on the money released.

The Pensions Regulator is about to launch a publicity drive to warn people of the dangers.

Bill Galvin said it is taking strong action against rogue firms.

"We have shut down over the last 18 months a number of vehicles which have been used for 'pension liberation' schemes, we have installed independent trustees," he said.

Money Box is broadcast on Saturdays at 12:00 GMT on BBC Radio 4 and repeated on Sundays at 21:00 GMT.

You can listen again via the BBC iPlayer or by downloading Money Box podcast.

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