Beware of unlocking your pension early, it could hurt you far more than you think
Published 30/07/2013 | 01:30
Question: I have been told that I can cash in my personal pension plan early (before age 55). I could really use the money now and pay off some debts and perhaps restart the pension later. Is this true and how can I do this.
Answer: What you have just described is something known as pension liberation.
In very simple terms this is a fraud and something that has become increasingly more sophisticated in recent years as the regulatory authorities and the pension industry attempt to block the attempts of those actively involved.
A pension plan is designed to provide long term benefits in retirement and currently benefits from tax privileges in order to encourage take up.
By the time most individuals reach retirement the tax incentives make up a considerable element of the overall benefits and those who have successfully liberated their pension plans can expect to hear from the HMRC shortly as this represents an unauthorised payment for which pension plans were not designed.
My advice is to totally avoid this course of action and speak to a qualified financial adviser.
The Pensions Advisory Service have also produced a very useful guide entitled 'Predators stalk your pension' identifiable by the Scorpion logo which can be accessed from their website.
In short this is fraud and you could be facilitating organised crime whilst putting your entire pension account at risk and receive nothing at all as has been the experience of others.