Pensions minister Steve Webb may change the law to make pension liberation a criminal offence.
The minster is holding a summit with pension regulators and providers to come up with a solution to the problem which is costing retirement savers millions in lost funds.
In advance of the meeting, the minister has warned savers that offers to unlock their pension funds early sound too good to be true because they are dealing with fraudsters.
Pension liberation or unlocking appears to offer a way for retirement savers under the age of 55 to access their funds.
The scam involves promises of an immediate cash return.
Hard-sell tactics
However, says the minister, the unlocking salesmen do not tell retirement savers that their action is illegal and taking some or all of their fund early comes with a fine of 55% of the pension fund from HM Revenue and Customs.
The move also means paying a large percentage of the fund in fees to the fraudsters and sometimes the funds disappear overseas and are not seen again.
The Pensions Regulator and other government agencies have joined together in a campaign to disrupt pension liberation. The meeting will include police, regulators and industry bodies.
The results include liberation cash transferred into scam pension funds and a police raid on a suspected organised crime gang responsible for sending hundreds of thousands of cold phone calls and email messages to snare hard-up retirement savers.
The minister explained pension liberation salesmen often look for customers with financial problems and try to get them to sign over their savings with hard-sell tactics.
Pension liberation is a crime
Webb said: “Pension liberation is a crime. We are working hard to stamp out the practice and need to make savers more aware of the risks involved in signing over their pensions. The regulators and industry will discuss this and come up with a solution, which may well mean changing the law.
“Anyone joining a pension unlocking scheme will devastate their retirement savings. The scam sounds like easy money, which makes the offer a temptation; these are crooks who are aware of this.
“If someone offers you a way to take your pension early, don’t touch it.”
Generally, pension rules only allow a retirement saver under the age of 55 to access their fund in exceptional cases, such as suffering from a terminal illness when the money in the fund will ease personal and financial suffering.
