“Liberate your pension”? Be warned!

According to The Times newspaper a growing number of people are being conned out of their pension pots by unscrupulous financial advisers (The Times – 25 June 2013)

More and more workers under 55 are being persuaded to “unlock” their pension savings; especially if they have fallen on hard times and need emergency cash.

The police, the insurance industry and regulators have been warning about unscrupulous financial advisers taking advantage of an individual’s need for cash during the recession; this con seems to have gathered pace in the last nine months.

  • Phoenix, the owners of Pearl Insurance, have stated that the requests for transfers had grown from 150 per month just three months ago to 520 in the latest four week period;
  • Friends Life have blocked 482 requests for transfer to suspicious schemes in the first five months of the year compared to only 56 in the whole of 2012; and
  • Aviva said it had blocked 240 requests in the period February to May (60 a month) compared to 25 a month at the end of last year.

In May, City of London Police raided an office and arrested seven people for allegedly texting and cold calling people offering pension “liberation”.

The Times also quotes that an estimated £400 million has been improperly transferred from legitimate pension savings.

Fees and taxes are very high

The victims find that most of their pension pots disappear in fees and taxes.

The fees can be as high as 30% and tax can be up to 55%.  For example if a pension pot of £20,000 is liberated, fees will typically be £7,000 and 55% tax will be payable on the balance of £13,000.  Leaving the victim with £5,850 out of a starting pot of £20,000.

Please be careful it is almost always unwise for people over 55 to take savings out of a pension.

If you become aware of a ‘liberation’ arrangement, HMRC have asked you to contact Action Fraud on 0300 123 2040 or the Pensions Helpline on 0845 600 2622.

Information courtesy of The Times newspaper – 25 June 2013.