Just over a month ago, chancellor George Osborne announced that anyone with a pension would soon be able to cash in the lot on retirement.
He didn't actually go into much detail at the time, but anyone who read the small print would soon have noticed that these withdrawals would be taxed at the pensioner's marginal income tax rate.
So, anyone taking out a substantial sum would end up paying the highest current rate 45% on a large percentage of their stash. That's something very few of us would like to do.
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Unfortunately, the second part of the message hasn't got through to everyone. As a result, says John Fox of Liberty SIPP in the Independent on Sunday, "the Budget announcement has given pension fraudsters a new lease of life".
Pension liberation fraud has been around for a while. You get a call from someone offering to help you get early access to your pension money. You think that sounds nice. You agree to transfer your pension to their scheme. You then pay them a whopping great fee and take your cash.
Shortly after that, HM Revenue & Customs come calling and charge you a 55% penal rate of tax on the entire amount that being the normal rate charged on unauthorised withdrawals.
The Independent on Sunday points to one individual who took out his £150,000 pension pot in this manner to settle some debts.He paid a £15,000 fee to the scheme providers, then an £82,500 tax bill. He ended up with a mere £52,500 in cash.
Some of the pension liberators act just about within the law. So if you want to be fool enough to break your pension and pay a 55% tax on it, when in only a matter of months you can have 25% tax free and the rest of it at your marginal income tax rate, you will be behaving entirely irrationally but you won't be committing a criminal offence.
However, whether they are within the law or not, these liberators' are all clearly stepping up their activity before the new rules render their fraud irrelevant. It is, says Pensions Insight, a bit of a "while stocks last" situation. So what should you watch out for?
Anyone promising you that they can release your pension before next year; anyone offering you liberation before you hit 55; anyone who texts or cold calls you on anything to do with your pension; or anyone working for a company you can't easily find on the Financial Conduct Authority (FCA) register.
Finally, watch out for fees. If you can't figure out exactly what they are, or you can't get hold of papers with the full details on them, you know that some sort of scam is underway. That holds good not just for pensions-related products, but for every single financial product on the market.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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