Pension liberation scams post threat to retirement

Preston-based financial advisory group, Taylor Patterson, is warning people to be on their guard against a growing number of scams that claim to release pension funds before retirement.

Along with the Pensions Regulator and government agencies such as HM Revenue and Customs (HMRC) and the Serious Fraud Office, Taylor Patterson is trying to raise awareness of so-called pension liberation schemes.

These scams, although occasionally technically legitimate, are more often illegal, and target people via texts, emails and cold calls. They offer to help release a proportion of an individual’s pension funds, but they usually fail to provide adequate information about the tax penalties of doing this before the age of 55.

Kerry Houghton, pensions expert at Taylor Patterson, said: “The whole area of pensions can be a minefield for the average person who, ultimately, just wants to know there will be enough in the pot to take them through retirement.

“But it is tempting to dip into that pot early and any schemes that offer to help you do that can seem very appealing. Some will even offer a substantial cash bonus for making a speedy transfer of funds.”

However, she pointed out that the short-term gain of taking up to 70% of a pension before the age of 55 can attract long-term tax penalties amounting to 55% of any money withdrawn. This is because HMRC regards this as an unauthorised payment. On top of this, the companies offering the service may impose charges of up to 30%.

Kerry continued: “At Taylor Patterson we have people with the knowledge and expertise to advise people on a wide range of bespoke pension solutions and help them avoid falling victim to scams like these.

“But they should still be aware of the warning signs to watch out for if they are contacted by one of these companies offering to free-up their pension.” The following features should sound a warning bell to pension holders:
  • Unsolicited calls or text messages
  • Promise of a cash bonus for speedy transfer of funds
  • No duplicate copies of official documents for you to retain
  • Any mention of legal loopholes
  • Pressure to make a hasty decision
  • Any indication that your remaining funds will be placed overseas