Pension Liberation FraudFraud

Pension Liberation has been a growing issue that has been investigated by the Pensions Regulator, Police and HMRC.  The “Scorpion” campaign has attempted to warn the public and the industry but there is still no end in sight to the success of the scammers and they are winning the battle. Pension Liberation means accessing pension funds before the age of 55 – and thousands of new scams and scammers have been identified every year since 1999.

The Pension Life Experience

Pension Life comes across many cases where victims are told they can liberate their pension before they are 55 years old without having to pay 55% tax. Pension liberation itself is not fraud (although it is unwise and expensive).  However, it is fraudulent for an adviser (or introducer) to promise that this will be tax free. Because it isn’t.

Liberation takes many forms and is often called a “loan”. The perpetrators claim there is “no connection between the pension transfer and the loan”. Whatever clever promises these scammers make – even in writing – that the “loans” are not taxable, this will make no difference to HMRC. They have seen many different ways of attempting to disguise the liberation, and quite frankly they don’t care how it is done or what it is called. If a pension is transferred and the victim is under 55 and ends up with cash as a result, he will also end up with a crippling tax bill.

Since the introduction of George Osborne’s “Pensions Freedoms” in April 2015, people can take 100% of their pensions in cash once they reach 55 if they want to. The first 25% is tax free, and the rest is taxable at the marginal (normal) rate. But anything taken out of a pension before the age of 55 is still classed as an “unauthorised payment” and will be taxed at the penal rate.

Many of the Class Action members were promised that their liberations (or loans) were tax free by a government consultant on pensions. But this still makes no difference to HMRC and they still issue the tax demands to all the victims.