A publicity campaign for consumers and the pensions sector has been launched as part of official efforts against people claiming to be able to release pensions cash as a loan or lump sum before the law allows.
The perpetrators often work alongside ‘introducers’ or ‘advisers’ who try to entice the public with spam text messages, cold calls or website promotions into transferring their workplace or private pension with the promise of being able to release a portion as cash before the age of 55.
People may be misled or not properly informed that tax charges and fees can erode their pension pot by more than half, leaving them with little to live on in retirement. The remainder of their funds are likely to be invested in highly dubious and risky, unregulated investment structures, often based overseas. The amount that has been ‘liberated’ from pension schemes in this way is known to be in the hundreds of millions of pounds, with thousands of members affected.
To combat this, the Pensions Regulator has worked with other agencies to produce information, carrying distinctive scorpion imagery, illustrating the threat to people’s pensions if they are taken in by such offers. The new information includes:
a warning insert that administrators and pension providers will be asked to include in the information they provide to members who request a transfer of their pension, which will be hosted on the Pensions Advisory Service website
a more detailed information leaflet for members looking to understand the consequences of these offers, which will also be hosted on the Pensions Advisory Service website
an action pack for pension professionals, including a checklist and examples of what to look out for.
Where administrators receive a transfer request and detect the warning signs of liberation, such as pension money being passed back to the member before age 55, they may wish to consider whether to make the transfer, and report their concerns to Action Fraud. The action pack includes more information to help them with this decision.
Steve Webb, Minister for Pensions, said: “Money in a pension is there for retirement and should not be released before at least the age of 55. The Government is investigating a number of schemes where firms appear to be preying on people when times are tight, and I am working closely with The Pensions Regulator to ensure rules are not being broken.”
The Pensions Regulator’s chief executive Bill Galvin said: “The pensions industry needs to do what it can to protect members from these offers. There can be a huge sting in the tail for those that are tempted by the sales patter. Before considering any transfer requests, we want trustees, providers and administrators to consider whether members’ savings are being transferred into a liberation scheme. Providers who don’t carry out due diligence before processing a transfer may be placing members at high risk – and also exposing themselves to significant reputational damage.”
HM Revenue and Custom’s (HMRC) head of pensions business Graeme Hood said: “Tax relief is given on pension savings to encourage individuals to save for the long-term to provide them with an income in retirement. HMRC is committed to ensuring savings built up with the benefit of generous tax reliefs are not misused. We will take action to detect and pursue those who deliberately break or bend the rules, including those offering schemes to access pension savings other than as intended by Parliament.”
The Financial Service Authority’s head of financial crime Sharon Campbell said: “Savers should be very wary of pension release schemes which often carry punitive, hidden rates of commission and where the promised investments may just be scams. They could end up losing all of their hard-earned pension.”
The Serious Fraud Office’s head of pensions fraud Jane De Lozey said: “We fully support this crucial multi-agency project to tackle this insidious crime and are currently investigating a number of suspected frauds involving attacks on individuals’ pensions.”
The Pensions Advisory Service’s chief executive Marta Phillips said: “Although it may be tempting to release cash from your pension early, schemes presented to you, particularly if you are under age 55, are unlikely to be legitimate and you will incur a large tax penalty. In addition, our experience is that you are also unlikely to ever recover the balance of your funds. Therefore, if it sounds too good to be true, it usually is.”
Action Fraud’s head Steve Proffitt said: “Never be rushed into an offer and always be on your guard against anyone trying to push you into a decision, especially when it concerns something as important as your pension. We would advise anyone who thinks they may have been a victim, or if they have information regarding pension liberation fraud to contact Action Fraud on 0300 123 2040.”
Signs
Accessing your pension before age 55 can result in an ‘unauthorised payment’ which can attract significant tax charges and penalties. On top of administration fees, total charges can amount to more than half of the amount transferred. Additionally, taking money early means individuals will be poorer in retirement.
Things to look out for:
being approached out of the blue over the phone or via text message
pushy advisers, often unregulated, who claim to be able to help you access your pension before age 55
companies that offer a ‘loan’, ‘saving advance’ or ‘cashback’ from your pension
any reference to ‘loopholes’, overseas investments, creative or new investment techniques.
If you think you may have been a victim, or if you have information regarding pension liberation fraud, contact Action Fraud on 0300 123 2040.
