UK: Pension “Liberation” Scams

UK pension liberation firms scam their victimsNot long ago we took a look at the growing problem of pension loans in the United States, and I have just finished reading on thisismoney.co.uk about what is happening in the UK.

While the name is different – in the United Kingdom this phenomenon is known as “Pension Liberation” – and of course some of the laws and tax requirements are not the same as in the US, essentially the problem is the same. Dubious, if not outright fraudulent companies encourage older members of society to tap into their pension funds before retirement age is reached.

While it is legal in the UK to transfer a pension plan to another account, and even to cash in on it before retirement, what many of these companies are doing is misinforming – or simply not informing – their clients/victims about how this money will be taxed.

It seems that in their eagerness to access their retirement funds early, many people are unaware that aside from the fees charged by these predatory companies, they are also almost always liable to pay 55% tax on money cashed out – and that 55% is to be paid on the whole amount, regardless of the percentage deducted by the pension liberation company as fees.

In other words, it is something that an extremely bad idea and to be avoided at all cost.

However, Pension Liberation firms are very good at manipulating their victims – for example, by encouraging them to take advantage of “legal loopholes” – and use cold-calling and even text messaging to lead them into a financial nightmare.

HM Revenue & Customs is launching an operation called Project Bloom to crack down on the worst of these companies, with more than 400 expected to be de-registered in the very near future.

You can find out more about this alarming trend here.

Philip

4 Comments

  1. It sickens me to see people taken advantage of like this. But other than pass the word around, what else can we do to stop this practice?

  2. I’m nowhere near retirement age, but I already know the sever penalties that come with tapping a pension early. I know that these companies are being dishonest and alluding to “legal loopholes” that promise to keep them safe, but seriously, how could anyone fall for this? How could so many people fall for this? I definitely think that the companies that are doing this should be shut down, but come on people, read before you sign.

    • Many people fall for it because the elderly are the most vulnerable group of people there is. They lived their lives in a totally different environment, a safer one, where people didn’t scam you all the time.

      I’m still having trouble convincing my elderly grandparents that the salespeople who come to their door are scammers, you can find the same products in the nearby supermarket at half the price, but since they know how to talk a lot and spin your head, the elderly are easily fooled. It’s a shame though.

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