Midland Financial Solutions Director Kevin Edwards explains why the process of unlocking your pension early is a dangerous game and how fraudsters are scamming hard-working Britons out of their retirement funds every day…
In this difficult economic climate, many people have been tempted by unsolicited text messages or online ads offering to ‘liberate’ or ‘unlock’ their pension early, allowing them to extract some cash from their pension now. But, this has had disastrous results.
Just a few weeks ago after an investigation by the National Fraud Intelligence Bureau, a multi-agency Government taskforce comprising of the National Lead Force for Fraud, Police Scotland and SOCA made arrests across the country as part of ‘pension liberation activity’ – this means fraud. The City of London Police Commander has called it the new ‘boiler room’ fraud, and it is estimated that thousands of people have released up to £400m into high risk and sometimes non-existent investment schemes that are often based overseas. For these people, their money already is gone.
How do these schemes work?
You can be approached in various ways from a call, a letter, via a website promotion or a text message. These ‘Pension liberation’ schemes encourage people to access their pension savings before the age of 55, often calling your investment a “frozen” pension.
The convincing criminals are currently offering either, or both, of two options (but beware that fraudulent tactics continuously evolve). They currently suggest that people take a loan from them, secured on your pension funds or the money might be transferred from your pension scheme into other allegedly excellent investments, that then turn out to be very risky, unregulated investments often based overseas. The fraudsters then take a fee of 10% to 20% of the amount transferred!
Apart from the fraudsters’ fees and financial demands, by drawing on your pension early you are breaking HM Revenue and Customs (HMRC) rules and they will also take up to 55% of your funds by way of an ‘Authorised Payment’ charge.
What should you do if you want to safely unlock your pension?
The only really safe option is to ensure you take independent, regulated financial advice, ideally from a Chartered Financial Planner – and definitely don’t respond to any unsolicited emails, tests, web promotions or phone calls. If you do respond and you are convinced that the deal the financial firm is offering is of benefit to you, please get a second opinion from an independent source. If they are a legitimate firm, they will have no problem in waiting and no issue with you wanting to take further advice.
Remember, it’s your future at stake – don’t risk it.
You can find a Chartered Financial Planner by logging onto the Chartered Insurance Institute’s website: http://www.cii.co.uk/