After a joint high profile campaign (including agencies such as HMRC, the Pensions Regulator, the FCA, the SFO and SOCA) seven people were arrested yesterday by City of London fraud police.

Essentially, the authorities are of the view that alleged pension liberation frauds are another manifestation of the ‘boiler room fraud’, and claim that since 2008 over £400 million has been defrauded.

Pension liberation schemes are not illegal per se; essentially it is the transfer of a pension scheme member’s savings to an arrangement that will allow access to the funds before the age of 55 years.

The authorities are of the view that because of the dire economic climate in this country, pension scheme members are tempted to release funds, e.g. to help their offspring with deposits for homes etc.

Allegations of fraud arise when members are misled about the consequences of such a transfer, e.g. not told about fees, tax liabilities, or how the remainder of the pension funds are invested.

Often loans are raised against the pension schemes or the monies are moved to an unregulated scheme (i.e. not registered to HMRC and the Pension Regulator), often to an offshore vehicle. The liberation company often charges a fee of between 20% and 30% and HMRC will tax any sums released.

The other aspect to pension liberation is that the taxes that HMRC will apply to the released funds are anything between 55% and 70%.

Contact Jeffrey Lewis if you have any problems concerning this issue.