Pension liberation is the act of accessing pension savings prior to the set statutory minimum age defined by law. Based on current UK pension rules this is 55
Releasing your pension early is only allowable under very strict rules. If you believe there is a genuine reason, such as terminal illness, for you to be able to access your pension early then please consult with HMRC directly as to your specific eligibility. Non legal withdrawal, also commonly known as pension busting, may result in both penalties and/or tax charges.
As you have benefited from a tax efficient pension structure but not adhered to the rules you will likely become liable for a charge on the withdrawn funds. At present this is set at 55%. It may be in your interest to notify HMRC as soon as possible to arrange payment. If you don’t then you may incur penalties on top of this figure.
If you have accessed your pension early, without legally being allowed to by HMRC, then you will likely be charged. After pension liberation has occurred it cannot be undone. You cannot plead ignorance or agree to refund the money back into the pension scheme to avoid any charges.
No. This is another method of pension liberation where the money is advanced as a loan. It is the equivalent of withdrawing the money and refunding it later. A tax charge is therefore liable.
Accessing a £100,000 pension illegitimately before 55 may result in the following costs;
Cost to the individual
Fees to the pension liberation company (typically 10-30%) = £20,000 average
Tax liable (55%) = £55,000
Total cost = £75,000 (excluding further penalties that may be applicable)
This is a demonstration case where a person has notified HMRC immediately upon realising their mistake resulting in them not being charged any additional penalties.
A worst case scenario is where the scheme is a scam. This may result in the complete loss of your pension whilst still leaving you fully liable for all tax due. Even when this isn’t the case, the owners of these schemes tend to be looking after their own self interest rather than their clients. It is not unknown for people to receive tax demands from HMRC long after the money has been spent.
Overseas pension schemes should only ever be considered by ex-patriots who can legitimately achieve benefits over UK based schemes. These schemes, including international self invested personal pension schemes (SIPPS) and qualified recognised overseas pension schemes (QROPS) are fully recognised by HMRC. There is therefore no issue about using them in the right circumstances if they have been established for a long time. Any other pension scheme, especially newly set up schemes, should be viewed as suspicious and treated accordingly.
Under no circumstances proceed with the offer. If you believe there is a legitimate reason for you to be able to access your pension early contact HMRC to confirm.
You may also wish to take a note of the pension liberation company’s details, if given, and contact the action fraud helpline +44 (0)300 123 2040.

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Pension Liberation Explained written by Don MacRitchie average rating 5/5 - 7 user ratings