Pension Reciprocation Plan - Is this legal?

Phil72

Hello all,

I have been seeking some help on a particular matter and stumbled upon the forums here, so hope I have come to the right place.

Recently I came across a company who claim on their website that you are able to “borrow up to 50% of your pension” with a “pension backed loan” at any age. As financially things are a bit of a struggle currently, and I have an old frozen pension from a previous employment I have been looking at the possibility of trying to release money from, I contacted them through their website.

I then promptly received a call from a man at the ‘Pension Backed Loans’ company who explained that they were acting as introducer to a separate company, who could provide me with a pension loan, who they would then pass my details on so they can call me directly.

A man from the other company then called me an hour later went through some details and explained how the process would work, which is basically through “something new only available since 2010” called a “Pension Reciprocation Plan (PRP)”, and that he would send more information about PRP to my email, along with an application form”

Anyway having examined the brochure they sent me and application forms attached to the email I am quite uneasy about a few things.

Firstly it says on the application form that the second company I spoke to (that sent me the email), are also only acting as introducer for yet another company who are the actual product providers. Upon searching the company name of the actual product provider in google, it would appear from their website that they operate from Alicante in Spain, which immediately set off a few alarm bells ringing in my head.

Also when searching “Pension Reciprocation Plan (PRP)”, there does not appear to be references to such a scheme anywhere else on the web other than on a few websites that point back to the website of this company in Alicante.

The following is quoted from the PDF brochure they sent me on how the process apparently works, perhaps someone here more in the know could tell me if they think any of this looks really possible? is it at all legal? or is it more likely to be a scam to avoid?

[FONT=&quot]GUIDE TO THE PENSION[/FONT]
[FONT=&quot]RECIPROCATION PLAN[/FONT]
[FONT=&quot] [/FONT]
_ [FONT=&quot]The Pensions Reciprocation Plan (PRP) has been[/FONT]
[FONT=&quot]available since August 2010. It enables those with UK[/FONT]
[FONT=&quot]pension rights to maximise the value from a UK pension[/FONT]
[FONT=&quot]fund.[/FONT]
_ [FONT=&quot]In addition the principles and objectives of the PRP are[/FONT]
[FONT=&quot]entirely consistent with the ultimate sole objective of[/FONT]
[FONT=&quot]any UK pension scheme - that of providing an income[/FONT]
[FONT=&quot]in retirement.[/FONT]
[FONT=&quot]Feb2011 v1.3 [/FONT][FONT=&quot][/FONT]
_ [FONT=&quot]The purpose of the PRP is to use a member’s pension[/FONT]
[FONT=&quot]fund in a way which enables current needs to be[/FONT]
[FONT=&quot]considered as well as long-term retirement needs.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]TRANSFERRING YOUR PENSION TO A[/FONT]
[FONT=&quot]MASTER PENSION SCHEME (MPS)[/FONT]
[FONT=&quot] [/FONT]
_ [FONT=&quot]The MPS is a unique arrangement that offers you the[/FONT]
[FONT=&quot]following features:[/FONT]
_ [FONT=&quot]Up to 50% of the fund is invested in a vehicle that will[/FONT]
[FONT=&quot]provide a secure investment return based upon a[/FONT]
[FONT=&quot]growth rate of 3% per annum simple.[/FONT]
_ [FONT=&quot]The balance of the fund (after deducting an[/FONT]
[FONT=&quot]administration fee) will be invested at the discretion of[/FONT]
[FONT=&quot]the MPS trustees and will typically include the[/FONT]
[FONT=&quot]Entrepreneurs Capital Holdings Fund (ECH)[/FONT][FONT=&quot]. [/FONT][FONT=&quot]The[/FONT]
[FONT=&quot]Feb2011 v1.[/FONT][FONT=&quot][/FONT]
[FONT=&quot]primary objective of the ECH is to protect capital whilst[/FONT]
[FONT=&quot]providing investors with attractive risk-adjusted returns[/FONT]
[FONT=&quot]through opportunistic finance-related investments with[/FONT]
[FONT=&quot]a residential real estate focus. The ECH where utilised[/FONT]
[FONT=&quot]will be on the basis of independent advice provided to[/FONT]
[FONT=&quot]MPS trustees.[/FONT]
_ [FONT=&quot]Transferring to the MPS allows you to access the[/FONT]
[FONT=&quot]Pension Reciprocation Plan (PRP).[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]THE OPERATION OF THE PRP[/FONT]
[FONT=&quot] [/FONT]
_ [FONT=&quot]Members of the MPS will be issued with a “note”,[/FONT]
[FONT=&quot]which may be exchanged for an immediate lump sum[/FONT]
[FONT=&quot]to the value set out in the “note”.[/FONT]
_ [FONT=&quot]The value of the note, and thus the value of the lump[/FONT]
[FONT=&quot]sum available (less an arrangement fee where[/FONT]
[FONT=&quot]applicable), is the same as the amount of your fund[/FONT]
[FONT=&quot]chosen to receive a secure investment return as set[/FONT]
[FONT=&quot]out on the previous page.[/FONT]
_ [FONT=&quot]The lump sum available for you to access is [/FONT][FONT=&quot]not[/FONT]
[FONT=&quot]provided from your pension fund but is provided by a[/FONT]
[FONT=&quot]Feb2011 v1.[/FONT][FONT=&quot][/FONT]
[FONT=&quot]third party.[/FONT]
_ [FONT=&quot]The lump sum you may receive will eventually need to[/FONT]
[FONT=&quot]be repaid. To enable this the part of the pension fund[/FONT]
[FONT=&quot]which receives a secure rate of return will always[/FONT]
[FONT=&quot]exactly match the amount that will eventually need to[/FONT]
[FONT=&quot]be repaid, and so facilitates repayment at the[/FONT]
[FONT=&quot]appropriate time.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]ACCESSING BENEFITS FROM THE MPS AND REPAYING THE “NOTE” OBLIGATION[/FONT]
_ [FONT=&quot]At any time after age 55 members are able to access[/FONT]
[FONT=&quot]benefits from the MPS in the form of a lump sum and[/FONT]
[FONT=&quot]an income.[/FONT]
_ [FONT=&quot]You are then obliged to repay the value at the time of[/FONT]
[FONT=&quot]the “note” - which will equal the value of that part of[/FONT]
[FONT=&quot]your pension fund that has been invested in a secure[/FONT]
[FONT=&quot]fashion.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]CHARGES[/FONT]
_ [FONT=&quot]The initial plan fee associated with the MPS is 5% of[/FONT]
[FONT=&quot]the transfer value or gross contribution invested and is[/FONT]
[FONT=&quot]deducted from the fund on receipt of the transfer value[/FONT]
[FONT=&quot]by the MPS. The amount available to be invested at[/FONT]
[FONT=&quot]the discretion of the MPS trustees (as set out earlier in[/FONT]
[FONT=&quot]this guide) is therefore reduced to this extent.[/FONT]
_ [FONT=&quot]There is an annual management charge on the MPS[/FONT]
[FONT=&quot]fund of 1% p.a.[/FONT]
_ [FONT=&quot]Part of the initial plan fee is payable to Premier Pension[/FONT]
[FONT=&quot]Solutions SL as a commission payment.[/FONT]
_ [FONT=&quot]In addition there is an administration fee payable to[/FONT]
[FONT=&quot]Premier Pension Transfers Ltd by deduction from the[/FONT]
[FONT=&quot]facility you are able to access from the “note” – the[/FONT]
[FONT=&quot]amount will be confirmed in writing to you prior to[/FONT]
[FONT=&quot]transfer[/FONT]
[FONT=&quot]RISKS[/FONT]
_ [FONT=&quot]Although there are many advantages associated with[/FONT]
[FONT=&quot]the MPS it is appropriate to point out to you the[/FONT]
[FONT=&quot]associated risks;[/FONT]
_ [FONT=&quot]The benefits you may receive from the MPS will be[/FONT]
[FONT=&quot]reduced as a consequence of using the “note” to[/FONT]
[FONT=&quot]access an immediate lump sum.[/FONT]
_ [FONT=&quot]The benefits you receive from the MPS may be less[/FONT]
[FONT=&quot]than the benefits received if you had not transferred to[/FONT]
[FONT=&quot]the MPS.[/FONT]
[FONT=&quot]Feb2011 v1.3 [/FONT][FONT=&quot][/FONT]
_ [FONT=&quot]If you are transferring benefits from a ‘defined benefit’[/FONT]
[FONT=&quot]or ‘final salary’ pension scheme, you will lose all[/FONT]
[FONT=&quot]entitlement to the benefits under that scheme – you[/FONT]
[FONT=&quot]should seek expert advice in this matter.[/FONT]

dunstonh

HMRC rules state that the loan has to be beneficial to the pension. This is where most of these unregulated companies advertising pension loans fall down. When the HMRC find out you have broken rules, they come after you for the penalties a few years later and you have no comeback against the company that did it.

I mention unregulated as they typically work on a basis where there is an unregulated introducer who then refers to an unregulated company who then set it up with no consumer protection. The FSA have listed some of these on their site but are typically behind the times in keeping up.

Premier Pension Transfers you mention on your post are not FSA authorised.

Pension Reciprocation Plan (PRP)

Is their marketing name.

The pensions regulator is currently doing a re-write on their pension liberation and other scams factsheet and it will apparently include references to these loan companies. Not by individual name but listing the problems and issues if you use them

Loughton_Monkey

Haven't a clue as to legality.

All you have to remember is that there are a bunch of shady property developers in Spain (and elswhere) who are trying very hard to offload their 'developments' in the guise of 50% loans on property held in a SIPP (or similar).

Such 'investment' will be unregulated.

You'd be far better of buying a load of 'bargepoles' with your money.

Phil72

Thanks to you all for your help, and I think I shall be taking Loughton Monkey's advice and invest in a very large barge pole to not touch this with.

I think it is probably a scam, at the very least they are seriously misleading people as they make no mention of the possibility of being hit by penalties by HMRC either when I spoke to them on the phone or anywhere in the literature they sent me.

And there is no point in taking a 50% 'loan' on the value of your pension when as dunstonh points out sooner or later you are going to be hit with a bill (which I have read elsewhere) is 55%? of the value of your fund from HMRC and be left with nothing now is there?

jamesd

It's a scam. Note how you'd be authorising them to put half of your money in any investment that they like and that the other half gets only non-compounding 3% interest rate a year. Seems like something a property developer woudl come up with to get cheap money.

You can do far better for investment returns using normal pension investments. But can't get access to any capital before age 55.

Don't be surprised if you get further approaches. You're probably on several sucker lists as a result of this inquiry and can expect that your details will be sold to other scammers.

Phil72

For info, as a warning to others to avoid this scam:

The first company I contacted was called pensionbackedloans.co.uk ,
the man I spoke to from them identified himself as Anthony Chewins, who then said he would pass my details on to a company called IQ Business Services who would call me back.

However the actual company that rang back on a Bournemouth area code number an hour later called themselves 'Smartview Consultancy' , and they then sent me the documentation about the so called Pension Reciprocation Plan, along with application form etc.

By some amazing coincidence pensionbackedloans.co.uk also appear to in Bournemouth as well! as when I look up Tony Chewins on linkedin, he gives his location as Bournemouth on his profile there. Strange that...

The website of Premier Pension Solutions, the Spanish based company is this prempensions.com , and I believe they may be using other 'introducer's' in addition to pensionbackedloans.co.uk from looking at various other websites that advertise their 'product'.

So beware!

davie213

Dear David,

You made an enquiry on pensionloansonline.co.uk today and since then our company has forwarded your details to firm passed in Spain, who we were led to believe were based in London, to assist you with a pension loan. It has just come to our attention that this firm is not FSA regulated and we strongly urge you to discontinue any future correspondence with this company. If you would like us to pass your details onto a UK based firm which are fully FSA regulated with a good reputation then please let me know as soon as possible and I will make sure this is done for you. I deeply apologise for the inconvenience.

Kind Regards
Pension Loans Online
thanks for help guys as i got this email when asked about Penison loans

Phil72

I have now received an email from Paul Elliott, the owner of IQ Business Services (the ones I was originally told by pensionbackedloans.co.uk would call be back), offering me a 'G Loan' against my pension.

Paul Elliott sounds like a lovely chap... he is also a Debt Collector.

And what he has to offer sounds even more dodgy than what the other lot in Spain!

From the sample loan agreement attached to email he sent me:

Loan Agreement between G Loans Limited and XXXX XXXX
Loan Ref. 999999
1. Lender
G Loans Limited

2. The Borrower
Name – XXXXXXX
Address –
DOB –
3. Amount of Loan Requested
£36848.60 on an interest only basis and the capital will be repaid from the proceeds of your pension fund.
4. Interest & Terms of Advance
The current interest rate is 5.5% fixed for 1 year.
The first year’s interest will be paid in advance.
Thereafter, interest will be charged at the rate 5% above bank base rate (currently 0.5% per annum) and will be due annually in arrears.
Interest will be charged at a daily rate after the first year.
Annual Percentage Rate (APR) is 10.76%.
5. Fees and Costs
a) Initial Fee of 5% of the loan amount (£1842.43).
b) Failure to repay any monies due within the agreed term will result in the default rate being applied of 10% per annum above the Bank of England Base Rate.
c) The maximum amount the borrower will be required to repay is the amount received, net of tax, from the borrower’s pension fund.
d) If any of the conditions in this agreement are not met, the loan will become due to be repaid immediately and interest will accrue at the default rate of 24% per annum.
6. Illustration of Costs
Initial Loan Amount £36848.60
Initial 5% Fee £1842.43
Year 1 interest in advance £1916.13
Amount of advance £33090.04
Interest payable in year 2 £2026.67
7. Purpose of the Loan
Personal Use
8. Securities and Guarantors
None.
9. Method of Repayment
From the net proceeds of the borrower’s pension.
10. Cancellation rights
1) If the agreement is signed at G Loans business premises address as shown above, then no prescribed cancellation period is necessary.
2) If you have received this agreement by post then you have 7 days in order to change your mind and cancel the arrangement. The rules state that you are allowed 5 days from the date of receipt as an opportunity to cancel. On receipt of this document you can choose to reduce your cancellation period by signing and returning the document in less than the 7 days allowed.
11. Special Conditions
1) It is expected that the borrower will utilise his pension benefits from his Self Invested Pension Plan (SIPP) with XYZ SIPP or subsequently transferred to another provider.
2) Pension benefits will be in the form of a lump
sum (‘tax free cash’) and net income (receivable after PAYE tax)
3) The borrower will utilise his tax free cash to reduce the loan balance. If the tax free cash is not sufficient to repay the entire loan, the borrower will utilise any net income drawn from the pension benefits.
4) The borrower will not have to repay more than the tax free cash and the net income that he receives from his pension.
5) The loan will become repayable immediately upon the death of the borrower and interest will accrue at the rate of Base Rate plus 5% from the date of death until the loan is repaid.
6) The maximum amount to be repaid on death will be the net death benefits from the borrower’s pension.
7) This loan has been granted due to the fact that the borrower has a total of approximately £70000 invested in a personal pension plan with ABC INSURANCE COMPANY.
8) As a condition of the loan being granted, the pension must be transferred within 4 weeks (if not already) of receiving the loan to a Self Invested Pension Plan (SIPP) with XYZ SIPP and after XYZ SIPP’s fees are paid the remaining monies must be used to buy ordinary shares and cumulative preference shares in KJK Investments Ltd. KJK Investments Ltd will then be liable for any fees subsequently due to XYZ SIPP. If KJK Investments Ltd fails to pay any fees to XYZ SIPP in respect of the borrower’s SIPP, the loan agreement becomes unenforceable.
9) The borrower cannot disinvest monies from KJK Investments Ltd or transfer monies away from XYZ SIPP without the written permission of G Loans Ltd. or unless the loan is repaid in full.
If any dividends or other monies are paid from KJK Investments Ltd into the borrower’s SIPP account the lender can insist on where these monies are subsequently invested unless the loan is repaid in full.
10) If any of the above conditions are not met, the loan will become due to be repaid
immediately and interest will immediately accrue at the default rate of 24% per annum.
This is a formal offer of loan and, subject to the above conditions being satisfactory, we will transfer the amount stated over to your account (see Section 6 ‘Amount of Advance’ above).

dunstonh

Thereafter, interest will be charged at the rate 5% above bank base rate (currently 0.5% per annum) and will be due annually in arrears.
Interest will be charged at a daily rate after the first year.
Annual Percentage Rate (APR) is 10.76%.

Look at that. BR+5% with an APR of 10.76%. Goodbye pension pot if you do this. And that is before you get pulled up by HMRC some years down the road for not using the pension loan correctly and get hit by their penalties

jamesd

It's worse. The money has to be invested in shares and preference shares of the company KJK Investments. So the financial prospects of that company are very significant. Goodbye pension pot could be due to more than just the interest rate.

Phil72

10) If any of the above conditions are not met, the loan will become due to be repaid
immediately and interest will immediately accrue at the default rate of 24% per annum.

So, after you have found out KJK Investments shares are worthless and your pension pot is empty + then get a bill for 55% value of the fund from HMRC land on your doorstep when they find out leaving you unable to repay, no doubt Paul Elliott the Debt Collector will then come knocking on your door looking for his loan back + 24% interest.

I don't know how these people sleep at night...