High Court rules that pension fund loans for under-55s are illegal

The High Court has ruled that arrangements which allow people to access their pension fund through loans before reaching age 55 are illegal.

Money Marketing first warned about the risks of investing in pension reciprocation plans in May last year. The schemes claim to allow people to borrow up to half of the value of their pension fund before age 55.

In June, Money Marketing revealed The Pensions Regulator had appointed independent trustee firm Dalriada Trustees to seize control of the bank accounts of six schemes used for pension reciprocation due to concerns the loans could be legally void. In July, a High Court judge froze over £1m of fees charged to members of pension reciprocation plans administered by Ark Business Consulting and two related entities.

In December, the High Court ruled that maximising pension value arrangements, which the schemes use to allow investors to access up to 50 per cent of the value of their pension pot, are legally void. The judgment will affect around 400 people with total savings of around £25m.

Law firm McGrigors, which is acting on behalf of Dalriada Trustees, says individuals who entered into the arrangements may have to repay the money they borrowed.

McGrigors pensions partner Ian Gordon says: “This is a victory for common sense and provides greater safety and security for pension scheme members.”

A spokesman for The Pensions Regulator says: “We welcome the Court’s decision. The appointed independent trustee, Dalriada Trustees, will write to members informing them of the outcome.”