release cash out of my pension early

vman

dunstonh wrote: »

Sending an inexperienced investor into the world of options is highly risky. Being paid a backhander from a pension investment is a breach of HMRC rules (it is an unauthorised payment) as well as highly unethical (if they want to give back some of their charges that is fine and they can do it within the pension. If its some marketing incentive then you need to ask why they are doing it and how much is it costing you to get that money as they are not giving it out of love. It comes out of someone's pot. Usually your own).

I don't agree with your opinion on options. I have friends offering options who I would trust whole heartedly, I haven't used one myself but I certainly wouldn't rule them out. You certainly wouldn't go into an option without using a specialist options solicitor, it’s their job to represent you and tell you exactly all the pro's and con's. I'm sure there are dodgy options people out there; there are dodgy people in all professions. There are crooked accountants, but that's not a good reason to not use accountants, it’s about building a trust relationship. Most people I know offering options are just ordinary folk who happen to be cash-rich so looking for a reasonable return on the money. It doesn’t need to be a stranger, if the OP has a cash rich friend they could appoint experienced solicitors and just do the deal themselves.
We have no idea of the OP’s figures but if I just throw some figures up. Say the OP has a remaining mortgage of £40K @ 6% and paying about £600/month. They also have a friend with £40K invested but making poor returns of 2% or 3%. The OP may say, OK I can’t afford my mortgage of £600 but should be good for £400/month. At 6% the £40K could be split into two blocks of £20K. The first £20K could be paid back in a repayment fashion @ £300 month, the second on an interest only basis @ £100/month. So for 7 years the OP is saving £200/month, will have paid off £20K of the mortgage but will still have a £20K debt (to be settled as a lump sum by the pension fund @ 55 years). That £200/month may be the difference between keeping or losing their house. The investor friend has doubled, or tripled their return compared to their previous investment on a secured loan. Both parties are well aware of what they have got into and protected by solicitor contracts. Nothing dodgy has happened. Options are very suitable for some people, but you need an open mind. Like I said, I’m not an options person myself, I’m just throwing some figures around that I might consider as making sense, and could work ethically for both parties. An options person will come up with dozens of potential solutions and I’m sure all better than my off-the-cuff attempt.

Re "Being paid a backhander from a pension investment is a breach of HMRC rules": Yes it is, but I certainly didn’t suggest that. The particular investment I had in mind when I wrote that has been successfully tested by HMRC at Queen's Counsel (and your pension pot is not touched regarding the monthly return).

vman

jamesd wrote: »

vman, another approach that can be used is to buy outside a pension something that is very lightly traded. Then offer to sell at a higher price. Buy from within the pension. The pension buy moves some money from the pension to outside the pension. The pension then has to sell and will probably see a loss at least as great as the gain outside the pension.

There are substantial risks with this, like other parties offering to trade - the pension could end up buying not from the non-pension offer but from a high but lower offer from someone else.

Yes, although I don't like telling people stuff cant be done (because invariably it can be done - and legally) any action that involves either selling or deliberately devaluing a pension smells a bit! Personally, I'd be extremely wary of such fiscal stunts!

phil.s_3

I agree, be careful as HMRC can practically do what they want sometimes.

jamesd

Yes, being extremely wary of such things is wise. HMRC already has substantial power to examine things and is getting more to help deal with "creative" ways around the intent of the rules.

What I described is an approach that some schemes have used. Since there's a perfect paper trail, all customers of such schemes can expect to receive substantial penalties when HMRC goes through their whole customer list!

Organised schemes can appear to get away with things for a few years until HMRC catches on, then it proves very painful for the customers.

Linton

The rules are clear that money should not be taken from pensions before 55. There have been various "clever", expensive, and risky ways devised to get round this. I think you will find that the FSA and HMRC have the powers to retrospectively declare such schemes as invalid and subject to punative tax rates.

See here from the FSA website. It does give a phone number you can use to check the legality and effectiveness of any scheme you come across.

johnnom

I was looking at ways of releasing funds from my pension and one scheme did involve a fee from some tax planners of 20% I could offset this by investing in Teak via a SIPP with a rebate payable that woulld cover the costs of releasing the remaining pension - tax free and paid into an account that I can use for whatever purpose - is this possible. It is supposed to be Queens Council approved and a means of financial / tax planning. Aother schems was to again pay a 20% fee covering the legal work etc to release into an umberella pension fund hat could then be tranferred into my own members personal mamangement company - do these sound legitimate options

RichandJ

johnnom wrote: »

I was looking at ways of releasing funds from my pension and one scheme did involve a fee from some tax planners of 20% I could offset this by investing in Teak via a SIPP with a rebate payable that woulld cover the costs of releasing the remaining pension - tax free and paid into an account that I can use for whatever purpose - is this possible. It is supposed to be Queens Council approved and a means of financial / tax planning. Aother schems was to again pay a 20% fee covering the legal work etc to release into an umberella pension fund hat could then be tranferred into my own members personal mamangement company - do these sound legitimate options

No.

Avoid. Queen's Counsel cannot approve anything by the way.

dunstonh

one scheme did involve a fee from some tax planners of 20% I could offset this by investing in Teak via a SIPP with a rebate payable that woulld cover the costs of releasing the remaining pension - tax free and paid into an account that I can use for whatever purpose

Usual scam and breach of HMRC rules.

It is supposed to be Queens Council approved

And the moon is made of cheese.

Aother schems was to again pay a 20% fee covering the legal work etc to release into an umberella pension fund hat could then be tranferred into my own members personal mamangement company - do these sound legitimate options

Goodbye pension. Hello HMRC investigation and fine. By the time that arrives the company that ate all your pension up will be long gone and as they are not regulated, you will be stuffed (and many of the scams have offshore bases just to make it even harder. They have a UK postal address which is often a PO box or virtual office but are actually based abroad).

vman

johnnom wrote: »

I was looking at ways of releasing funds from my pension and one scheme did involve a fee from some tax planners of 20% I could offset this by investing in Teak via a SIPP with a rebate payable that woulld cover the costs of releasing the remaining pension - tax free and paid into an account that I can use for whatever purpose - is this possible. It is supposed to be Queens Council approved and a means of financial / tax planning. Aother schems was to again pay a 20% fee covering the legal work etc to release into an umberella pension fund hat could then be tranferred into my own members personal mamangement company - do these sound legitimate options

Not sure these sound legit in the way described, the second sounds almost possible but not structured in that way. Don't you find the fee structure a bit suspicious?! If you have a pot of 50K you pay much lower fees than if you have 500K - surely its the same amount of work? Even on the small 50K, is 10K a reasonable admin fee?! It really doesn't cost them anything like that. That's the biggest alarm bell for me, a legit operator charges a fee that is representative of the work carried out. I wouldn't want to wipe out 20% of my fund, that's a bl**dy expensive way of getting your hands on some money!

btw, its Queens Counsel Opinion, rather than Queens Council approved. Its a strong opinion but it aint law. HMRC are the law, they pretty much seem to make it up as they go along and do seem to get away with what they want. If HMRC challenge you, are you in a position to defend? It could be costly.