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Pension Release

Posted by on in Financial Services Blog
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With the cost of living increasing and the easy access to credit that people enjoyed in the last decade a distant memory, it's no surprise that people are looking for ways to boost their spending power. It is an environment like this where the unscrupulous prey on the vulnerable and use people's concerns to con them out of their savings. The latest I've come across is "pension release"

What could be wrong with something as positive sounding as "pension release" or even "pension liberation"? Schemes that promise to give you access to your "hard earned pension" that the big bad insurers won't let you access are increasingly common. The literature states how their scheme allows you to access your pension before the standard minimum age of 55 and promises more than the maximum 25% lump sum you can usually take. There are many ways they promise to do this, perhaps involving a loan, moving the fund overseas or investing in a particular asset that utilises a "legal loophole" to give you the access you require.

Technically they are correct, in as much as you, the individual taking part in the pension liberation scheme, do not commit a criminal act. However, what they don't tell you is the payments they make are "unauthorised payments" and as such subject to a charge of 55%. Where you do end up committing a criminal act is if you fail to notify HMRC that you have taken an unauthorised payment. In addition to the unauthorised payment charge there can be further penalties applied by HMRC for failing to disclose. But how will you get caught? Quite simply when the companies offering these schemes are identified the regulator asks pension providers for a list of any transfers to that company and then track you down.

In addition to the 55% charge you must pay HMRC, the company offering the scheme make a charge, typically in excess of 20%. This leaves you with around a quarter of the true value of your pension fund and potentially, a criminal record.

If you are offered such a scheme check the "adviser" is authorised and regulated by the FCA. Check directly with the FCA, either by phone or on their website. As always, if something sounds too good to be true it probably is.

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