Pension liberation has been in the news a fair bit recently.
It doesn’t look like it’s going to go away any time soon, either. The ranks of the ‘liberators’ are swelling and their sights are firmly set on targeting anyone vulnerable in need of a bit of spare cash (and in the still-delicate economic climate, there are many such people).
This rise of the pension liberators was confirmed recently by the life insurer, Phoenix Group, which said it has seen a sharp rise in the number of suspicious transfer requests. Friends Life has apparently seen the same thing. If not on quite the same the level, we have experienced it, too – and it’s a major cause for concern.
Generally speaking, the pension liberators masquerade as Ssas, non-participation occupational schemes or umbrella funds. But you can usually spot them a mile off, thankfully. Something tells you that the scheme being transferred to just isn’t right.
Responding to this trend, we have said openly that we will refuse to transfer a client’s pension to any scheme that we believe is overtly, or covertly, run by pension liberators.
It can be hard sometimes to stick to this position but we do and we will continue to do so. Some customers naturally get irate, some have even threatened us with legal action, but we feel it is our duty to protect them.
After all, there will only be one outcome and that is serious financial loss for the customer.
We believe that any pension provider and anyone in the sector as a whole should adopt the same stance and help people rebuff these so-called liberators. Simply looking at this as someone else’s problem and saying that ‘it’s their choice’ is the wrong approach.
Do you think the people being hoodwinked by these schemes really understand the full impact of the tax hit (of 55 per cent) and fees (as high as 30 per cent)? And, just as importantly, do you think the schemes tell these people about the punitive tax charge in advance?
Like hell they do – and that’s fraud.
As I see it, these schemes are on the same level as the payday loan companies with their ridiculously high APRs. In fact, they’re worse. You could argue that a payday loan might just be appropriate for a few people in a certain financial context, for example, if they will pay the loan back in a matter of days and be done with it.
But pension liberation schemes? No good at all can come from them and people shouldn’t go anywhere near them. Ever.
John Fox is managing director at Liberty Sipp
