Regulator issues pension liberation scheme warning
The Pensions Regulator is highlighting the risks associated with so-called ‘pension liberation’ schemes, which often leave investors substantially out of pocket.
Pension holders should resist the temptation to release money from their pension fund before the age of 55 the regulator warns, as Pension Liberation schemes are often scams offered by unauthorised firms.
These firms are usually located overseas and are therefore not covered by UK compensation schemes and are virtually untraceable.
Their representatives make unsolicited telephone calls to householders, asking if they are interested in unlocking their pension funds before retirement and converting them into cash, but householders should be very wary of doing so.
Pension holders are persuaded to transfer their pension fund into the firm’s fund and the firm then lends back half of the value to the customer in the form of a loan, on which the customer may have to pay charges to HM Revenue & Customs.
The firm may then take a substantial fee out of the remaining half of the pension transfer fund and the remaining balance is used for unregulated investments abroad.
This leaves the pension holder with little or no pension savings for retirement.
The Pensions Regulator advises anyone who is approached about a Pension Liberation scheme to contact them.
The Financial Services Authority’s consumer helpline and HMRC’s Pensions Anti Fraud Unit will also be able to offer advice.
With interest rates low and the value of pensions falling, may people have lost confidence in financial products and this is contributing to a worrying trend for private sector workers to leave their pension schemes altogether.
The latest figures from the Office for National Statistics show that less than half of employees are in a workplace pension scheme – the lowest level for 15 years, and just a third of private sector employees are in a scheme.