Firms offering to liberate a saver’s pension are being targeted as part of a further clampdown by HM Revenue and Customs with clarification of where complaints can be made.
Many of those who would undertake pension liberation, which is gaining access to your pension pot before the age of 55, are being told by financial advisers that they can exploit a legal loophole.
HMRC has put the new warning on its website stating there is no legal loophole and that anyone accessing the pension fund before they are legally entitled to will face a 55% tax charge.
In addition, HMRC is also warning that the company offering to liberate the person’s pension will often charge a hefty fee for doing so, but the tax charge will be made on the full value of the pension.
In addition to the charge, the saver will also face further penalties which could take HMRC’s slice of the pot up to 70% which, in addition to the company’s fee, will devastate the savings.
Pension liberation loopholes
The taxman’s warning follows a campaign earlier this year about the dangers of pension liberation which was entitled ‘Predators stalk your pension’.
A spokesman for HMRC said: “Some financial advisers are advising people that there are loopholes available for them to transfer their pension into other schemes so they can access their pensions early.
“However, this is simply a ploy to get people to transfer their pension so these financial advisers can claim their fees.”
Pension liberation is an increasingly controversial tactic being used by people who are hard-up and desperate for money to gain access to their pension savings.
HMRC says it is now working with other agencies to ‘detect, disrupt and deter’ such activity.
So serious is the situation that people with complaints should direct themselves to Action Fraud, which is a national fraud reporting centre, and investigations will be coordinated from there.
Fraud action
The move is in response to the increasing number of complaints, particularly those from financial advisers concerned about the growth in these schemes, and where those reports should be directed.
The Pensions Regulator has previously said that the responsibility for tackling pension liberation fraud lies with a number of organisations, scheme members and trustees.
To underline the increasing fight against the growth in such pension liberation schemes, the Advertising Standards Authority recently demanded that a Leeds-based marketing company pull its text messaging campaign because it breached its code.
Action Fraud can be contacted on 0300 123 2040 and the Pensions Helpline is 0845 600 2622.
