It is particularly concerning when I come across unregulated and unqualified people offering advice about pensions. However badly some people think of financial advisers, using companies that are not even regulated by the FSA is very worrying and illegal. Financial planners like me, spend years learning about pension rules – which are constantly being updated and despite promises from the previous Government to make pensions simple, the reality is completely the opposite. This is admittedly a very poor state of affairs when a pension should be in every UK adult’s vocabulary of financial planning. Good financial planning involves repayment of debt, building wealth and avoiding unnecessary charges and penalties. This latest “pension liberation” scam increases debt and reduces wealth and increases charges dramatically.

There has been a spate of small adverts, some appearing on social networking sites such as Facebook which I have seen myself and are completely misleading. These are designed to entice people needing cash and having a pension pot to “liberate” the cash from the pension. There is also the suggestion that investment performance will be improved. However cash from pensions can only be taken from age 55 and is restricted to 25% of the fund. Taking more is illegal and will invoke charges and penalties from HMRC resulting in a significantly worse pension. There has been over £200m moved into these bogus arrangements already according to the Pensions Regulator, FSA and HMRC the bulk of which has occurred since May 2010.

The schemes effectively set up loans and the only people making money from them are those that are “arranging” them. The promise is one of liberating up to 50% of the value of a pension fund before the age of 55. These schemes tend to operate by paying 50% of the fund in the form of a reciprocal loan with another investor. The balance of the fund is often put into some very dubious property deals. This is a scam, fraud -swindle and thoroughly unethical. Do not be taken in by such schemes. As a financial planner I find this deeply depressing, my industry has enough jargon and mis-selling scandals without another one rearing its head from “advisers” that are not advisers and unregulated. This will not end well. See here for more details about pension liberation. Please pass this post on to your social network friends. You can also click here to see some of the more common scams and swindles that the FSA attempt to prevent.

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