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What is pension liberation?

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Since 2015, pension freedoms have meant that people have much more control over how they choose to prepare for retirement. However, it has left them open to scammers looking to take advantage of hard-working people. One of these scams is called ‘pension liberation’.

What is pension liberation?

Pension liberation is a type of scam. The scammer convinces an individual to remove funds from their pension pot without permission from HMRC. The money is then transferred into high-risk overseas schemes.

Can under-55s unlock their pension?

Though it is rare, it is possible to unlock your pension before the age of 55. However, these unique circumstances are usually reserved for cases of people who are suffering from a terminal illness.

How does the scam work?

Scammers will get in touch via a cold call to make you aware of a ‘legal loophole’ that allows you to transfer your pension into a scheme with low risk and high returns. However, there is no loophole. Accessing your pension pot without permission from HMRC is illegal.

What are the risks?

Pension liberation scams carry a number of consequences for the victim.

Huge charges

As an unauthorised payment, HMRC will charge between 55 and 70 per cent of the pension pot in tax.

On top of this, the scammer, or ‘introducer’, will charge an ‘administration fee’ for getting you set up in the scheme.

After all of the charges, you could be left with as little as 10 per cent of your pension pot to invest, making you much worse off than before.

Losing your entire pension pot

Once your money is transferred into an overseas scheme, there’s a good chance you’ll never see it again. The schemes are extremely high risk, and sometimes non-existent. As they are not regulated by a UK authority, there is no rescue plan when it’s gone.

How to spot a scam

If someone gets in touch out of the blue asking about your finances, there’s a good chance that they don’t have your best intentions in mind.

Read our blog on how to avoid scams for our top tips on how to spot a pension scam, and what you can do if you think someone is trying to scam you.

If you believe you may have been mis-sold a pension investment, we can provide a free consultation on the next steps to take. Get in touch to speak to our experts today.