The shocking scale of pension liberation fraud is seeping out from financial firms and regulators for the first time.
Four of Britain’s biggest pension providers have stalled more than 1,500 suspected fraudulent transfers worth millions of pounds in the past few months.
Pension unlocking or liberation involves switching retirement funds from a legitimate provider generally to a trust.
The trustees then take a large slice of the transfer as a fee and let the pension investor access the funds.
Pension laws say accessing a pension before the age of 55 except under special circumstances is illegal.
Savers risk everything
Most retirement savers involved in pension unlocking are aged under 55.
The four firms who have so far revealed figures are:
- Standard Life – the firm has rejected 200 pension liberation transfers adding up to around £5 million
- Legal & General – around 300 transfers were refused
- Friends Life – another 500 transfers were blocked
- Phoenix Group – turned down 520 transfers worth around £7 million
Besides paying a large fee to the pension liberation firm, HM Revenue and Customs levies fines and penalties on any pension transfer of between 55% and 75% of the value of the fund.
Jamie Jenkins, of Standard Life, explained the number of pension liberation cases was increasing and retirement savers risked losing their savings to unscrupulous fraudsters.
“Many of those considering pension liberation are facing financial difficulties and see the move as a solution to their problems,” he said.
“But they risk losing a big slice of their pension in fees and taxes. Some who transfer overseas may lose every penny they have saved. Not only do they have to pay the tax man, but they have no money left over for their retirement, so it’s a double disaster.”
One problem voiced by providers is pension rules only allow them to block a transfer for a certain time period, but HMRC and pension regulators are working with them to work around the issue. New laws are expected soon to police pension transfers.
Meanwhile, the Financial Conduct Authority, the regulatory body for pension firms, has revealed that HMRC is ready to close down almost 500 pension trusts who aid pension liberation fraudsters by accepting the transfer of retirement funds.
Police have also cracked down on pension liberation advisers by raiding an office in London traced as the source of cold-call texts and telephone calls offering advice on pension liberation scams.