Changes to pension rules has raised fears about potential pension liberation scams, whereby individuals will be enticed to cash in their pension pots and evade tax by unscrupulous companies, seen as likely to increase with the removal of the requirement to purchase annuities
HMRC has published revised guidance to warn pension savers of significant tax consequences of pension liberation scams and where to go for further information.
These promoters offer personal loans, cash incentives and one-off pension investments, attracting savers by claiming to help them access their pension before age 55, or that they can already take more than 25% of their pension as cash.
The law, as it currently stands, only allows pension scheme members to draw from their pension before age 55 in rare cases such as terminal illness. It also only allows pension scheme members to take up to 25% of their pension savings as a cash lump sum.
Although this law may change in the future, HMRC say it is ‘important that members aren't fooled into thinking that is the law today’.
Specific ‘action packs’ are available for pensions professionals, trustees and individuals.
They provide guidance on what to do to reduce the risk of becoming involved in these scams, and the tax impact of releasing pension funds early using these types of arrangements.
The respective action packs are available at http://www.thepensionsregulator.gov.uk/pension-scams