What is pension liberation fraud and how could it affect me?

Pension liberation is a transfer of a scheme member’s pension savings to an arrangement that claims to allow them access to their funds before age 55.

Pension liberation can be illegal, and members are often misled about the key consequences of entering into one of these arrangements. Also, there's no guarantee that members will get their money back if something goes wrong.

Pension liberation can result in tax charges and penalties of more than half the value of a member’s pension savings, and the people being targeted are usually not told about these tax implications.

More and more companies are targeting savers claiming they can help them take, or access, their pension cash early. Individuals may be targeted through websites, mass texting or through cold calls. You should never give out personal information in response to an unsolicited text or a cold call. You should always make sure that you know who you're dealing with.

How could I be affected?

You may be:

  • poorer in retirement
  • charged unexpectedly high fees
  • misled as to the consequences of the transfer
  • subject to significant charges by HM Revenue and Customs (HMRC)
  • a victim of theft and lose all your pension funds

More information

The Pensions Regulator provides some background on how to spot potential pension scams, what to do if you suspect a scam and who to contact. See the action pack (PDF - 1.6mb)(Opens new window)

Pension liberation fraud shouldn't be confused with 'pension unlocking', where a person aged 55 or over can release up to 25% of their total pension as a tax-free lump sum. Or in certain medical circumstances, such as terminal illness, pensions funds may be released early, however medical evidence would be required.

If you're considering transferring your pension, we recommend you take advice from a registered independent financial adviser (IFA) and make sure that this is unbiased advice from someone who isn't associated with the proposal you may have received. You can check if an IFA is registered with the Financial Conduct Authority.

We also recommend that you read the pension liberation fraud awareness leaflet, available on the Pensions Advisory Service website, which includes five steps to avoid becoming a victim.

In summary

Converting a pension into cash might sound very attractive to people who urgently need money. However, if something sounds too good to be true, it usually is.

We reserve the right to carry out due diligence on new schemes or schemes unknown to us as part of our duties as scheme Trustee. In certain circumstances, this could result in a delay in your pension transfer.