Pension liberation scheme KJK Investments Ltd and loan company G-Loans have been closed down by the government Insolvency Service.
More than 200 retirement savers transferred £11.9 million into the scheme run by the two companies over almost three years and are likely to have lost their money.
They are also facing HM Revenue & Customs tax penalties of 55% of the cash they transferred for making unauthorised withdrawals from their pension funds.
The Insolvency Service asked the High Court to wind up the companies in the public interest following an investigation.
The court heard that retirement savers were urged to borrow from another company, G Loans Ltd, providing they bought shares in KJK Investments.
Millions gone missing
G-Loans offered them borrowings of 50% against the cash invested in KJK Investments.
Around £6.3 million was lent to retirement savers aged under 55 years old.
Pension rules do not allow retirement savers to draw cash from their pensions except in special circumstances, such as suffering from serious ill health.
The Insolvency Service argued that G Loans was not a commercial lender, but the money loaned by the firm was borrowed from KJK Investments and funded by the pension fund investments.
Borrowers paid no interest on the loans, so G-Loans could not repay KJK Investments and KLK Investments had no funds to pay dividends to investors.
The balance of pension transfers collected by KJK Investments was loaned to other companies on uncommercial terms and spent on commissions, fees and salaries to directors and other people involved in running the pension liberation operation.
Savers misled
The directors received £490,000, while commissions of £900,000 were paid to the team selling the scheme.
The court agreed that KJK Investments ran a pension liberation scheme and that retirement savers who invested in the company had little prospect of the return of their money.
Colin Cronin, who supervised the investigation, said: “Pension liberation is not what it seems. Companies promote the schemes as an easy way to access pension cash, but firms offering the service often mislead retirement savers about the true nature of the arrangement and the risk of losing their money.
“This company failed to tell savers they were borrowing money from their own pensions and was found to be operating against the public interest.”
