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High Court rules unlocking schemes contravene pensions law

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

Money Marketing first warned about the risks of investing in pension reciprocation plans in May. 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.

The court today 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 combined savings of around £25m.

Law firm McGrigors, which is acting on behalf of Dalriada Trustees, says there is also a prospect of individuals who entered into the arrangements having to repay the money they borrowed.

McGrigors pensions partner Ian Gordon says: “Today’s judgment represents a victory for common sense, and provides greater safety and security for pension scheme members in future. The Pensions Regulator came in for criticism earlier this year for being too interventionist, but this case clearly demonstrates that the approach taken was the right one.

“There are any number of pensions unlocking schemes out there which have been devised to take cash out of people’s pension pots and put it into dubious-looking investments – and to take a commission for the privilege.

“We believe that today’s judgment will help stem the flow of money into schemes of this kind, and that can only help pension savers confidence in the long term.”

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.

“The parties have 21 days to apply to the Court of Appeal for permission to appeal should they wish to do so. If permission is not applied for or is not granted, the Court will be asked to provide further clarification on the practical consequences of the judgment.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. I do wonder what this will mean to Clients who signed waivers that the advice through a leading Accountancy firm was without liability.

    Think the waivers won’t stand scrutiny myself as the ‘poor punters’ were unknowing and just wanted the cash.

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