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What is pension liberation?

Pension liberation also known as 'pension loans' and 'pension scams', is a transfer of a scheme member’s pension savings to an arrangement that will allow them to access their funds before the age 55.

In rare cases – such as terminal illness – it is possible to access funds before age 55 from a current pension scheme. For the majority, promises of early cash will be bogus and are likely to result in serious tax consequences.

When can pension liberation become fraud?

Pension liberation can be illegal where members are misled about key consequences of entering into one of these arrangements. This could be because they’re not informed of the tax consequences, fees involved or how the remainder of their pension savings are invested.

Pension liberation can result in tax charges and penalties of more than half the value of a member’s pension savings, and those being targeted are usually not being told about these potential tax implications.

How are individuals targeted?

An increasing number of companies are targeting savers claiming that they can help them take their pension cash early. Individuals may be targeted through websites, mass texting or through cold calls. Individuals should be very wary about giving out information in response to a text or cold call. They should always make sure that they know who they are dealing with.

What's the catch?

Converting a pension into cash might sound very attractive to people who urgently need money. However, if something sounds too good to be true, it invariably is.

  • A member may be poorer in retirement. A member can only use their pension fund once. If they liberate their pension, there will be much less (or no) income from it when they retire.
  • A member may be hit by unexpectedly high fees. As part of the liberation transaction, a member will probably have to pay the organisers a 'commission' or 'arrangement fee' and these can typically range from 10 – 30%.
  • A member may be misled as to the consequences of the transfer. The member may not be informed or misled as to huge tax consequences of making such a transfer.
  • A member may be hit with significant charges by HM Revenue and Customs (HMRC). If a member has liberated their pension, they need to tell HMRC and will have to pay tax. If they fail to tell HMRC and HMRC contacts the member first, they may be charged penalties and interest in addition to the tax.

You can find a number of example scenarios of pension liberation fraud in our pension liberation fraud action pack:

Is pension liberation fraud the same as 'pension unlocking'?

No. Pension liberation fraud should not be confused with 'pension unlocking'. With pension unlocking, a person aged 55 or over can release up to 25% of their total pension as a tax free lump sum.

Unlocking a pension will almost certainly mean a member will have less income in retirement and, as a result, unlocking is only suitable for a very limited number of people and circumstances.

What to look out for

Pensions professionals and trustees

When processing a transfer request, trustees and administrators may be in a position to indentify the warning signs that suggest that pension liberation fraud is occurring.

If you are a trustee or administrator, and any of the following criteria apply to a transfer request you have received, then you may be about to transfer a member’s pension to a scheme designed to liberate their funds.

Here are some of the things to look out for:

  • receiving scheme not registered, or only newly registered, with HM Revenue and Customs
  • member is attempting to access their pension  before 55
  • member has pressurised trustees / administrators to carry out transfer quickly
  • member was approached unsolicited
  • member informed that there is a legal loophole
  • receiving scheme was previously unknown to you, but now involved in more than one transfer request.


Members should ensure that they take appropriate financial advice before using such websites and be aware of the potential for charges being imposed by HMRC. Members should consider taking advice from an independent financial adviser (IFA) and make sure that they take unbiased advice from someone who isn’t associated with the proposal they’ve received. They can check if an IFA is registered with the Financial Conduct Authority

The pension liberation fraud awareness leaflet (PDF, 832kb, 10 pages) and the pension liberation fraud awareness leaflet: Welsh version (PDF, 891kb, 10 pages) are available on the Pensions Advisory Service (TPAS) website, include five steps to avoid becoming a victim, which include speaking to a financial adviser for their advice and never giving out financial or personal information to a cold caller.

Members can also watch the following video from TPAS on YouTube: Thinking of taking your pension early - watch out for pension fraud.

What action is the regulator taking to tackle pension liberation fraud?

The Pension Regulator has joined forces with a number of government agencies to help combat this threat and is also working with industry.

The regulator's powers to ensure that members are protected include the:

  • suspension and / or prohibition of trustees
  • appointment of new trustees to schemes
  • issuing of financial penalties
  • freezing and repatriating pension scheme monies.

The regulator continues to investigate new reports of liberation and will continue to co-operate with the pensions industry, other government agencies and law enforcement agencies to ensure liberation is prevented, deterred and disrupted.

Delaying transfer payments

We can’t pre-determine any future regulatory action we may take on any particular case. However, where the transferring trustees or administrators have reason to believe that member funds may be liberated and can evidence their concerns, then this would be a relevant factor to the regulator when deciding whether it would be appropriate to take action in respect to a non-payment of a transfer.

For this to be considered, we would expect trustees / managers to be able to demonstrate that they have taken steps to establish the legitimacy of an arrangement where they have delayed making a transfer for that reason.

Who to contact

If you are concerned or are approached and offered the services we have described above, you should contact Action Fraud on 0300 123 2040.

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© The Pensions Regulator