In the United Kingdom, pension liberation is a term used by

confidence trick A scam, or a confidence trick, is an attempt to defraud a person or group after first gaining their trust. Confidence tricks exploit victims using a combination of the victim's credulity, naivety, compassion, vanity, confidence, irrespons ...

sters that purports to allow individuals to access the funds within a

pension A pension (; ) is a fund into which amounts are paid regularly during an individual's working career, and from which periodic payments are made to support the person's retirement from work. A pension may be either a " defined benefit plan", wh ...

before the age of 55 when permission has not been provided by

HM Revenue and Customs His Majesty's Revenue and Customs (commonly HM Revenue and Customs, or HMRC, and formerly Her Majesty's Revenue and Customs) is a department of the UK government responsible for the collection of taxes, the payment of some forms of stat ...

(HMRC).

Background

Except in rare circumstances, such as

terminal illness Terminal illness or end-stage disease is a disease that cannot be cured or adequately treated and is expected to result in the death of the patient. This term is more commonly used for progressive diseases such as cancer, rather than fatal injur ...

, pensions can only be legally accessed from the age of 55, and most opportunities to do so earlier are scams. Scammers use confusion with pension release to convince the unsuspecting that there is a legal

loophole A loophole is an ambiguity or inadequacy in a system, such as a law or security, which can be used to circumvent or otherwise avoid the purpose, implied or explicitly stated, of the system. Originally, the word meant an arrowslit, a narrow vertic ...

that allows them to access the money, but the High Court ruled in May 2014 that no such loophole exists. "Liberated" money is typically placed into overseas funds, which are high risk with little to no

regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...

. Pension liberation carries large costs. HMRC imposes a 55% tax charge on any money released, and the scheme could have very high fees in excess of 20%. HMRC also charges a further 55% tax on the scheme's fee. The table below gives an example breakdown of the tax and fees, demonstrating how little the pension holder receives:

Consequences of Pension liberation

Between the end of 2013 and July 2014, the amount of money lost to liberation schemes increased 18%. A campaign started by the Pensions Regulator in February 2013 led to frozen assets in 20 schemes, the suspension of 18 pension liberation

website A website (also written as a web site) is any web page whose content is identified by a common domain name and is published on at least one web server. Websites are typically dedicated to a particular topic or purpose, such as news, educatio ...

s and seven

arrest An arrest is the act of apprehending and taking a person into custody (legal protection or control), usually because the person has been suspected of or observed committing a crime. After being taken into custody, the person can be question ...

s. Pension liberation can leave people in financial ruin, and suicides have been reported as a result. The Financial Times reported the

suicide Suicide is the act of intentionally causing one's own death. Risk factors for suicide include mental disorders, physical disorders, and substance abuse. Some suicides are impulsive acts driven by stress (such as from financial or ac ...

a 40-year-old man who did not receive the £17,000 lump sum promised to him from a liberation scheme. Pension liberation operators may use website promotions, cold calls or

text message Text messaging, or texting, is the act of composing and sending electronic messages, typically consisting of alphabetic and numeric characters, between two or more users of mobile phones, tablet computers, smartwatches, desktop computer, des ...

s to encourage

people The term "the people" refers to the public or Common people, common mass of people of a polity. As such it is a concept of human rights law, international law as well as constitutional law, particularly used for claims of popular sovereignty. I ...

to access their pension before 55. The

Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom. It operates independently of the UK Government and is financed by charging fees to members of the financial services industry. The FCA regulates financi ...

warns against cold-calling scams and it is advised to only work with a company registered on the FCA's list of regulated companies.

Differences with Pension Release

Pension release is when a person removes

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: m ...

from their pension once they are 55 or older. As of 2015 UK

law Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior, with its precise definition a matter of longstanding debate. It has been variously described as a science and as the ar ...

allows up to 25% of a defined contribution pension to be released tax free from the age of 55. People can be tricked into a pension liberation scam if they are unaware that they cannot access their pension at a younger age. The remainder of the

fund Fund may refer to: * Funding is the act of providing resources, usually in form of money, or other values such as effort or time, for a project, a person, a business, or any other private or public institution ** The process of soliciting and gathe ...

stays

invested Investment is traditionally defined as the "commitment of resources into something expected to gain value over time". If an investment involves money, then it can be defined as a "commitment of money to receive more money later". From a broade ...

until the individual decides to start drawing an income from it. Between April 2014 and April 2015 funds not exceeding £30,000 can be taken in their entirety, but from April 2015, restrictions on how much money is removed from a pension fund will be lifted, and a marginal rate of tax will be applied to withdrawals. The age limit of 55 will remain.

References

{{reflist Pensions in the United Kingdom Confidence tricks