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Watch out for the pension liberation monster

Angry man cartoon

The latest scam to emerge comes from companies offering you early access to your pension savings. So if you receive a call or text about pension liberation, avoid it at all costs!

Over the past few months, we’ve launched a crusade against the millions of nuisance calls and texts that are plaguing people on a daily basis.

The majority of calls and texts lead back to financial services products – with 62% of people receiving calls from claims firms about payment protection insurance. And now, the latest nuisance comes in the form of ‘pension liberation’ – a real by-product of the straightened times we’re living in.

Pension liberation companies get in touch, offering to unshackle the money that’s tied up in your pension before you turn 55 – the earliest age you can access it. At best, this is an extremely expensive way of getting access to your pension savings and, at worst, a major crime that could see you receiving no money at all.

The pension liberation scam

It works like this. A pensions company sends you a text saying: ‘Unlock the value of your frozen pension and get cash back today.’ You respond, tempted by the idea of getting hold of the thousands of pounds that you’ve saved over the years, and you get a call from the company saying they’ll do the legwork for you.

They may offer a cash incentive or loan to move your money to another scheme, or offer to get all of your pension savings straight away. But like many claims companies, you’ll be charged a hefty ‘arrangement fee’ for doing this – somewhere between 10% and 30% of the size of your pension fund.

And what the companies often don’t tell you is that there’s an enormous tax charge for accessing your pension early – 55% of the money you take out. So, if you were looking to liberate £100,000 from your pension, you might end up having to shell out £30,000 in fees to the company, leaving you with £70,000.

A couple of weeks later, you’ll get a letter from HM Revenue & Customs (HMRC) demanding 55% – not of what you’ve got left, but of what was originally in your pension. So you have to pay another £55,000 – leaving you with just £15,000. That’s an 85% hit to get early access.

And in some cases, you may not see your cash at all. There are pension liberation companies operating a highly sophisticated scam, designed to rob you of your pension savings completely.

A monster of a problem

Double headed pension monsterPension liberation is a double-headed monster, and the problem skims across almost a dozen regulatory and enforcement bodies. On one hand, you have the nuisance text element – in May, the Information Commissioner’s Office claimed reports of pensions nuisance texts had treble since December 2012.

On the other hand, there’s the fraudulent side of pension liberation, and it’s where the combination of The Pensions Regulator, HMRC, the Financial Conduct Authority, Serious Fraud Office and Serious Organised Crime Agency have had the biggest impact on trying to close down the scam.

So far, arrests have been made, HMRC has deregistered 500 companies it believes are involved in the scam, while legitimate pension providers have been delaying and blocking transfers to those it sees as suspicious.

As with most scams, shutting them down is like catching smoke. So, it pays to be alert to the dangers of accessing your savings through these schemes. If you receive one of these texts, contact Action Fraud (0300 123 2040) immediately. Even if you do need the cash, the after-effects of going down this route will be anything but liberating.


I can understand why people are tempted by this. I missed out on being able to take 25% of my pension at the age of 50 by 18 months, I now have to wait until I’m 55. I wonder how many people would have legally taken money at 50 and now can’t.