Consumers warned of ‘pension liberation’ scams

The Pensions Regulator is concerned about the risks that come with popular ‘pension liberation’ schemes which often leave those that invest in them with very little in return.

According to the regulator, pension holders should not withdraw money from their pension funds prior to the age of 55 since most of the schemes that allow you to do is are scams run by firms that are unauthorised.

Most of the firms that offer the pension liberation scheme are usually based overseas and thus they do not have the safety of cover within the UK compensation scheme. Even worse, due to the fact that they are run overseas they are also usually not traceable leaving those that are taken advantage of very few options.

The schemes are run by representatives that make random telephone calls to homes asking the head of the household if they are interested in getting some of the cash in their pension fund early so that they can make use of the money now.

If the pension holder agrees then they are told to move their pension fund into a fund that is run by the firm. In return, the fund promises to lend half of the funds value to the customer; which means that the consumer will most likely have to pay interest charges to HM Revenue & Customs. Therefore, you can actually end up paying taxes on a fund that is supposed to be tax free.

At this point, the firm takes out their large fee for the process and invests what is left in unregulated investments overseas, which can result in the pension holder being left with no actual savings once they retire.