Pensions liberation fraud

An explanation of pension liberation and how it works.

What is pension liberation?

Pension liberation schemes are pension plans which claim to allow individuals access to the money in their pension fund before they reach age 55.

This is not within HMRC rules which only allow access before this age in very specific circumstances. These apply to specific professions, which allowed an early normal retirement age prior to 6 April 2006 (A-Day) and to those too ill to continue their occupation.

They do not apply to individuals who simply need the money to spend, however great that need may be.

How does it work?

Pension liberation schemes vary but typically share some common features:

  • They solicit business via direct advertising or cold calls.
  • They require the client to instigate a transfer to a new pension plan, which may be overseas.
  • The receiving plan has only been in existence for a few months.
  • The companies related to the receiving scheme have only been in existence for a few months.
  • No advice is given regarding investments but normally there is an overseas property investment.
  • The investment usually has a high guaranteed rate of return included in the documents.

They can also be expensive:

  1. The administration charges on the new plan can be very high.
  2. The management charge for releasing the payment may well be up to 30% of the fund value prior to the payment.
  3. On top of this, the payment itself is an unauthorised payment and will result in a tax charge of 55% which the individual is personally liable for.
  4. Lastly, any remaining pension is usually invested in a specific company, often overseas, making it very hard to trace if the company ceases to trade (perhaps as a result of an HMRC investigation).

Some individuals may be so desperate for the money they accept these charges; the worry is that others may not be aware of the full cost until after the lump sum has been spent.

And of course the impact on the individual's future pension could be considerable.

How could it be stopped?

  1. HMRC have tightened up their registration process for new schemes. 
  2. A court case initiated by The Pensions Regulator (TPR) clarified that 9 suspected pensions liberation plans were true occupational schemes, which allows TPR to appoint Independent Trustees, who can stop transfers into and out of these schemes.
  3. The introduction of a wider "watch list" of existing arrangements which would give scheme trustees a clear remit to block any transfers to them.
  4. Pensions liberation fraud would not be necessary if there was an authorised way to release pension fund money prior to age 55.
  5. Making it a legal requirement for small self administered schemes to have independent or pensioneer trustee.

Pensions unlocking

Pensions unlocking and pensions liberation are often discussed as if they are the same thing. Pensions unlocking when it refers to withdrawals after age 55 is both legal and within HMRC rules.

Further information

Both the Pensions Regulator (TPR) and the Pensions Advisory Service (TPAS) have published guidance on liberation which you can pass on to your clients:

The Financial Conduct Authority have created a 'Warning List Widget' which can be used to check an investment or pension opportunity and avoid scams.


The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

Last updated: 12 Nov 2018

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.