‘Too good to be true’ pension release claims targeted
HM Revenue & Customs (HMRC) has issued a new warning on the risks involved in the early accessing or unlocking of a pension.
The alert came on 23 April, as HMRC warned people with pension savings that they could be targeted by “unscrupulous firms” using misleading information, including offering personal loans or cash incentives to entice them into cashing in pension pots before the age of 55.
HMRC said: “This is known as ‘pension liberation’. Even if you’re not approached, but take the initiative yourself to access your pension early, some or all of your hard-earned pension savings may be at stake. You will be liable to pay a tax bill of more than half of your pension savings that you access and may have to pay tax penalties too.”
The HMRC alert followed the launch of a campaign earlier in the year by organisations including the Pensions Regulator and the Pensions Advisory Service, as part of a crackdown on pension liberation schemes.
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.”
Accessing a pension before the age of 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. The campaign said pension savers should beware of:
- being approached out of the blue over the phone or via text message
- pushy advisers, often unregulated, who claim to be able to help consumers access pensions before age 55
- companies that offer a loan, saving advance or cashback from a pension
- references to loopholes, overseas investments, creative or new investment techniques.
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.”
Link: HMRC advice