Suspected pension liberation fraudsters arrested

A number of people have been arrested in connection with suspected pension liberation fraud. Here's how to avoid being a victim.

Police in London, Scotland and Cheshire have made a number of arrests over suspected pension liberation schemes.

An organised crime gang who are allegedly responsibly for setting up pension liberation scams, where savers are given the option of early access to the cash in their pension pot, has also been dismantled.

More than £400 million has now been released through these schemes. The number of spam texts related to such schemes has also tripled in the past six months; in March one in eight texts were related to pensions.

Criminals target savers via email, text messages and cold calling to persuade them to unlock their money early in return for a fee. But by doing so they are left exposed to huge tax charges of around 55%.

Pension liberation

Pension liberation isn’t illegal, but it becomes illegal when someone isn’t given the right information or is misled about the tax consequences.

Many of these criminals approach savers without informing them of what will happen to their cash after the money has been withdrawn. They also charge a huge fee for the service.

The current economic climate has created a boom in interest for pension liberation as desperate savers look for a way to get their hands on this money before they turn 55.

Regulator warning

In February the Pensions Regulator issued a warning about these schemes and launched a campaign to make the public more aware about the risks involved.

With pension liberation, the pension holder moves their cash from a pension into a savings pot, via an administrator or an introducer. HM Revenue & Customs (HMRC) will then slap on a fee of around 55% of the total amount. The pension holder will also need to pay out between 10% and 30% of the pot to the company which has organised the withdrawal.

This means pensioners are being robbed of a substantial amount of their retirement savings and the pension which is left is then invested in unregulated and risky investments.

How to avoid being conned

The campaign launched earlier this year is aimed at savers and industry professionals. Information packs are being sent out to anyone who applies to transfer their pension funds giving advice about the dangers of pension liberation.

Text messages are the most common way fraudsters will get in contact about pension liberation and these will often include words such as “unlocking” with reference to money held in a pension.

If you’re approached by a company like this you can get advice from Action Fraud on its website or by calling 0300 123 2040 and you can also report cases if you think you’ve been a victim of fraud.

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