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Pension regulator warns against unlocking schemes

Pension regulator say that individuals have been put at risk from websites and salespeople who offer them the opportunity to cash in their pension tax-free before retirement.

Pensions regulator, which works with HMRC and FSA to monitor business models, has warned that “if something sounds too good to be true then it invariably is”.

The comments follow the High Court’s ruling on 16 December that ‘pension reciprocation plan’ arrangements breach pension law.

In May 2011, The Pensions Regulator appointed Dalriada Trustees with powers to administer six schemes operated by Ark Business Consulting.

This included a structure which used loans between pension schemes as a means of unlocking pension capital prior to retirement.

But on 16 December, Mr Justice Bean found that the loans were outside the powers of the schemes’ trustees.

Bill Galvin, chief executive at The Pensions Regulator, said that the regulator was working with HM Revenue & Customs and the Financial Services Authority to monitor business models and will use its powers to disrupt them if necessary.

He said: “Operators will often charge substantial commission, and other charges, and members run the risk of having to pay unauthorised payment charges to HMRC.”