Pension liberation....

Dead_keen

The tax from HMRC is not just a theoretical thing either. There have been quite a few cases at the tax tribunals last year: https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2019/TC07499.html

The individual here had a pension pot of £172,000. He got a loan of £91,578.95 (on which he has to pay interest of 5.5% per year). But after his fees and having to pay the first year's interest he got £82,237.89 in his pocket.

The way the scam worked meant that the pension pot effectively disappeared ("the appointed insolvency practitioner has said that it is unlikely that the Appellant will recover any of the £172,000").

The tax tribunal said HMRC was right to charge £50,367 by way of an unauthorised payments charge and an unauthorised payments surcharge. This is 55% of the gross amount of the loan (i.e. on way more than the individual got).

The tribunal also said HMRC's penalty of £7,555.26 was ok too. This was 15% of the tax (and had been reduced from 30% by HMRC for full cooperation).

So that to me says that of the £172,000 pension pot, the individual got a net £24,315.63. That is just 14% of the pension pot.

In this type of scheme the lender may still ask for the £91,578.95 back (plus 5.5% interest) as the money was a loan. Although the reality in this particular case is that the insolvency service got involved and closed down the companies involved - but only after the scammers got £11.9m.

Silvertabby

15% pension scheme tax penalty in addition to the member's 55%. After the scammers had trousered their 'share' pensioner could be left with a minus balance.

Malthusian

xylophone wrote: »

Illegal? There is some nuancing required? See below.

Not for the OP. It is illegal. The argument over whether "illegal" means "not permitted" or "a criminal act" is only of interest to philosophers.

The MAS should know better than to confuse desperate people with philosophical nonsense about pension liberation scamming not being illegal.

Accessing your pension over 55 is not illegal in any sense if serious ill-health, terminal illness or a protected scheme age apply

"Pension liberation" always refers to scamming someone out of their money on the pretext that you will help them access it earlier than permitted. It is therefore always illegal in every sense (because it is fraud and fraud is a crime). If you take a pension before 55 due to serious ill-health or having a protected scheme age, this is not pension liberation, this is using serious ill-health rules or a protected scheme age. Referring to legal pre-55 access as "pension liberation" is bad use of English. There is no need to liberate something that is free already.

Conflating legal means of pre-55 access with pension liberation fraud is like saying that shoplifting is not always illegal because if you give the shopkeeper some money you can legally walk out with their goods. Paying the shopkeeper disqualifies it as shoplifting. Having a protected scheme age or serious ill-health disqualifies it as pension liberation.

Nobody has ever contacted a company offering "pension liberation" and been told "oh, sorry, we only help people with serious ill-health / terminal illness / protected scheme ages".

The MAS' use of the term is incorrect, like a lot of nonsense on Government websites (cf the Government guidance that care agencies didn't have to pay minimum wage).

xylophone

The argument over whether "illegal" means "not permitted" or "a criminal act" is only of interest to philosophers.

It is also of interest to those interested in accuracy.

An action may be immoral, inadvisable or downright dangerous without necessarily being illegal where illegal is defined as against the law.

As well as the links above, I note:

https://www.lexisnexis.co.uk/legal/guidance/pension-liberation-legal-considerations
Pension liberation’ is commonly used to describe the release of funds to an individual from his or her own HMRC registered pension scheme before age 55 and without the exceptional circumstance of terminal illness applying. .................. This is not automatically illegal in that money can be taken out from your pension scheme but, in so doing, there should be adverse tax consequences given the payment to an individual in this way is likely to constitute an ‘unauthorised payment’ for the purposes of the Finance Act 2004 (FA 2004) (see below). The payment, which might be described as a ‘loan’, a ‘rebate’ or ‘commission’, will potentially breach scheme rules if those rules prohibit unauthorised payments.

I further note that in https://www.pensionsadvisoryservice.org.uk/about-pensions/retirement-choices/pension-liberation-plans the word illegal is carefully avoided and this appears to be the case even here https://www.pensions-ombudsman.org.uk/2015/04/pension-liberation/

And I should say that I added my post above purely in the interests of accuracy - I am not advocating or suggesting that accessing a pension before age 55 (except within the strictly defined categories) is in any way advisable!

Malthusian

xylophone wrote: »

It is also of interest to those interested in accuracy.

An action may be immoral, inadvisable or downright dangerous without necessarily being illegal where illegal is defined as against the law.

Illegal is also defined as "contrary to or forbidden by official rules, regulations, etc" (dictionary.com).

Pension liberation is illegal as it is contrary to official HMRC rules on minimum pension age.

It is also illegal even if you confine yourself to the narrower meaning of "criminal act" in that it always involves the loss of your money to fraud. This is because no legitimate scheme will facilitate pension liberation, leaving only fraudulent ones that will steal your money.

Pension liberation’ is commonly used to describe the release of funds to an individual from his or her own HMRC registered pension scheme before age 55 and without the exceptional circumstance of terminal illness applying

This is inaccurate. Serious ill health (scheme rules permitting) or a protected scheme age also allow funds to be drawn from a pension before age 55, and are not pension liberation. The fact that the author of the Lexisnexis article did not know about serious ill health rules or protected scheme ages (both of which are moderately obscure) does not alter the fact that pension liberation is a scam.

The LexisNexis article repeats the myth, which still persists in these threads and random junk from Professor Google, that you can access your pension if you are desperate enough to pay a 55% or 70% tax charge (after adding in the scheme sanction charge). This is inaccurate. No legitimate pension scheme will facilitate pension liberation even if the member is desperate / stupid enough to pay the entire tax charge, because of the risk of deregistration that applies to the entire scheme.

This is important because scammers feed off inaccurate use of language like this. People in a desperate situation will often latch on to the one shred of information that suggests they can get their money and ignore the mountain of evidence that says they can't.

A number of official Government documents correctly use the term "pension liberation" to mean the fraudulent activity of illegal unauthorised payments (example) as opposed to legitimate pre-55 access.

vulcanrtb

If the OP wants an example of the kind of people he could be dealing with https://www.bournemouthecho.co.uk/news/16175062.anthony-locke-and-ray-king-organised-pension-scam/

And please, please, an end to the illegal or not whataboutery :beer:

xylophone

No legitimate pension scheme will facilitate pension liberation even if the member is desperate / stupid enough to pay the entire tax charge, because of the risk of deregistration that applies to the entire scheme.

Did I say that it would? Please see last line of post 2 above.

Malthusian

The only part of your post I took issue with was the statement that pension liberation fraud is not always illegal, and the wider myth that pension liberation is possible if you are desperate enough to pay the tax charge.

Marcon

Don't waste time bickering over semantics. OP has clearly got the message (or has just decided to do their own thing despite all the warnings to the contrary), so not much point adding to this thread when the answer is so simple: 'Pensions liberation? Don't even think about it'.

xylophone

And see Pension liberation https://www.gov.uk/guidance/pension-schemes-and-unauthorised-payments

From HMRC
Unscrupulous firms are using misleading information to promote personal loans or cash incentives and enticing savers to unlock their pension pots early. Very often these firms say there is a legal loophole they can use so you don’t pay tax. There is no legal loophole and these transactions are unauthorised payments.

There is no legal loophole to avoid paying tax.

But none of the links I cited said that there was? Quite the reverse.

But where does it say that an unauthorised payment is illegal?

And did the High Court ever make Pension Liberation schemes illegal?

https://www.telegraph.co.uk/finance/personalfinance/pensions/10181758/Make-pensions-liberation-schemes-illegal.html

And if it didn't, is this why the question around "illegality" appears to persist?