Half Pensions No Liberation Protection

Half Pensions No Liberation Protection.

The Pensions Regulated (TPR) has commissioned a report investigating the actions of the trustees and administrators in connection with managing the risk of illegal Pension Liberation.

The report found that less than half of small schemes (those that have less than 99 members) discussed pension liberation at their trustee meetings.

Of all replies, both large and small schemes, 96% of schemes were aware of pension liberation and virtually all larger schemes had provision to investigate all scheme transfers and block such transfers.

What is pension liberation?

We are not allowed to take pension benefits or access some of our pension fund before aged 55.

Pension Liberation is where people transfer their pension to obscure UK or offshore based schemes where special purpose vehicles (SPVs) as used to for example: a fellow member lends you their pension fund and your lend yours to them or other straightforward “trust busting” arrangements to break up the scheme and release money. The objective being to release money early i.e. before age 55.

Whilst not strictly illegal, a number of cases have passed through the UK courts, ruling that it is against the “public good” and certainly means that people have received what is known as an “unauthorised payment” i.e. it does not comply with UK pension law and is therefore subject to a 55% tax charge on the person that has received the money and further tax charges and penalties on the pension scheme itself.

This has resulted in many people receiving fines as much as they received from their pension fund in cash and then the balance of the pension fund also disappears in fines and tax penalties. I.e. 100% of the pension fund is gone.

Comment

We have always advised any person who has approached us about this type of scheme to not do it, to walk away from any company offering the service suggesting that you risk losing all your money. The courts have even given HMRC power to seize the assets of firms running Pension Liberation schemes.

We are absolutely staggered that even now, a few years on, many small pension schemes have no provision to ensure that any outgoing pension transfers are not checked properly to ensure that they are being transferred out to legitimate registered pension schemes.