Pension Liberation Fraud

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Over the past few months Merseyside Pension Fund has received a number of telephone calls from members, particularly under age 55, who wish to opt-out of pension saving with the Local Government Pension Scheme (LGPS).
 
During conversations with these members it has emerged that, in a growing number of cases, it is the member’s intention, having ‘opted-out’ of the Scheme, to transfer their pension fund to another ‘scheme’ for it to be taken as cash before retirement.
 
This is known as ‘pension liberation’ and is an ‘unauthorised access’ to taxable income which will result in a sanction charge being enforced by Her Majesty’s Revenue & Customs (HMRC) against individuals.
 
It should not be confused with 'pension unlocking' which allows people over age 55 access to up to a quarter of their pension as a cash payment, but equally leads to less income in retirement or payments to dependants on death in service.
 

So what’s the catch?

 
  • Once a pension is ‘liberated’, there will be little (or no) income from it at retirement. Death benefits may be lost – so no income for your dependants should you die in service
  • The ‘Organiser’ is usually paid a ‘commission’ directly out of the ‘fund’ (in some cases up to 30%)
  • In transfers of this type, tax is payable, at 55% on the transferred amount
  • Failure to inform HMRC incurs penalties and interest, in addition to the tax.
 
Converting a pension into cash might sound like an easy and very attractive means of raising money during these times of uncertainty and financial difficulty, however it should be noted that generally, if something sounds too good to be true, it invariably is.
 

More Information

 
 
If you think you may have been a victim, or if you have information regarding pension liberation fraud, contact Action Fraud on 0300 123 2040.
 
If you, or someone you know, has been contacted about transferring a pension to another scheme and are concerned about whether it is legitimate, then contact The Pensions Advisory Service (TPAS) helpline for information and guidance on 020 7932 5791.
 
Please provide as much information as you can about the services and the firms involved, including their contact details and 'firm reference number' (FRN) if they claim to be authorised by the Financial Services Authority (FSA).
 
Financial Conduct Authority
0845 606 1234
 
HMRC Pension Anti-fraud Unit
0115 974 2147
 
The Pensions Advisory Service
0207 932 5791