The Occupational Pensions Regulatory Authority has stepped up its campaign to warn consumers against pension liberation scams.
Opra has updated its guides to members and trustees to highlight the dangers that pension liberation poses for consumers looking for a means to free up cash from their pension schemes quickly.
Pension liberation or “trust busting” is obtaining a cash sum for pension benefits following a transfer contrary to Inland Revenue requirements. Opra is warning pension scheme members who are below the usual earliest retirement age of 50 not to be tempted to transfer their pensions to schemes run by people offering to release the cash.
It says members can end up losing all their pension rights as well as much of the transferred cash lump sum through commission and income tax.
Opra warns pension scheme trustees, managers and administrators to ensure they have the appropriate controls in place to prevent transfers to liberation schemes.
It also highlights common features of bogus schemes to watch out for. It says liberation schemes will often be newly established, the transfer documentation sent out may not look professional or will be difficult to understand and the schemes may require payment by cheque to ensure account details are kept secret.
Although many liberation schemes have received formal approval from Inland Revenue Savings, Pensions, Share Schemes, which is required to operate as an occupational scheme, some use fake numbers. Other schemes use reference numbers borrowed from defunct pension schemes.
Pension liberation is different from pension unlocking, where an adviser can arrange the immediate purchase of an annuity for an occupational scheme member aged 50 or over, usually following a transfer into an individual pension arrangement. This is a legitimate practice providing the legal and Inland Revenue requirements are met.
Origen pensions director Michelle Cracknell says: “I am not surprised that Opra has reissued a warning now as a spate of these schemes star-ted up recently. The difference is members are now being targeted individually.”