News that an estimated £15m has been snatched from savers' pensions through fraudulent liberation companies serves as a warning to us all. Trying to access your pension money early is a recipe for disaster.
But in the same way viruses mutate to get around vaccines and cause pandemics, pension liberators are rapidly changing tactics to claw chunks out of savers' pensions, while managing to remain under the radar.
However, the saga now seems to be taking a fresh twist. Since pension liberation made the headlines several months ago, some pension companies have reported a spike in phone calls from seemingly savvy - and wealthy - savers attempting to get unauthorised early access to millions of pounds worth of their own pension savings.
Current rules mean retirement funds cannot be accessed until the age of 55. But, by registering a shell company, they can set up a type of workplace pension called a small self-administered scheme (SSAS). Anyone can transfer their entire pension into it and slyly access the money without telling the taxman.
Because most SSAS providers are turning their business away, no one really knows who these people are. Providers who've taken the calls believe they are ordinary people who want early pensions access, but others are worried they could be the pension liberators themselves using these vehicles to liberate other peoples' pensions for profit.
Some providers run background checks on "suspicious" phone calls where the customer is reluctant to disclose information and is keen to remove the professional trustee from the account, These checks often reveal the businesses these people claim to run have only been set up in recent weeks and haven't even traded yet, suggesting they are just shells.
HM Revenue & Customs is aware of this practice and will issue people trying to liberate their own pension with a 70 per cent tax bill. Liberating your own pension isn't illegal yet, but an eye-watering tax bill and a fine of up to £3,000 should be enough to put you off. Add onto this the set-up cost of a SSAS - typically around £1,000 - and it starts to look like an even worse idea.
Martin Tilley, director of technical services at Dentons, is certain anyone who takes unauthorised payments will eventually be caught by the revenue - even if it's years after the event took place. "Sophisticated investors trying to play the system need to reconsider their actions," he said.
A spokesperson for the Pensions Regulator said: "The Pensions Regulator and HMRC are alive to the risks of fraud in this area and liaise closely over the regulation of small self-administered schemes.
“If an individual sets up a SSAS scheme with a view to accessing a pension lump sum earlier than the law allows they are likely to be liable for a substantial tax charge from HMRC.
"The regulator is working with its partners in the cross-government 'Project Bloom' task force to warn against the risks of pensions liberation fraud and to dismantle those models that pose the greatest risk to members."
Pension liberation: Need to know
■ Pension liberation (also known as pension loans) is a way of releasing pension funds before the age of 55, and turning it partly or entirely to cash.
■ The service is offered by companies that make money by charging you a fee or by taking big chunks of cash directly from your pension. If you receive a text message from someone offering to unlock your pension, do not be tempted to reply. Contact Action Fraud if you are concerned that you may have been targeted by pension liberation fraud. Its number is 0300 123 2040.
■ The Revenue is poised to take action against 500 "dubious" pension liberation companies and the process could soon become illegal. And earlier this year the Pensions Minister Steve Webb MP told us he is doing everything he can to clamp down on it.
