The Daily Mirror Newspaper - April 2013
Within three days we were contacted by two different whistleblowers wanting to warn the public about the problems associated with trying to unlock your pension
We contacted the Daily Mirror investigations team who ran a story which can be read below.
Beware dodgy offers to unlock your pension early and tax-free
Conditions are ripe for a new breed of pension scammer. The dire state of the economy and record low interest rates make it more tempting than ever to raid the money that we should be keeping for retirement.
Taking cash out of your pension before you reach the age of 55 would normally land you with a tax bill of 55% or more.
But there's no shortage of snake-oil salesmen who claim to know a way around the rules - for a hefty fee.
Here's a worst case scenario of what can happen if you "liberate" a pension.
Aldo Zanetti, 39, was trying to sell his house and was in negative equity when he considered attempting to get the £20,000 sitting in his pension.
An online search led him to Freedom Capital Partners.
"They told me about a scheme that would release 60 to 70% of my pension," Aldo s aid.
Freedom Capital passed him onto a second company, Lothbury Pension Administration, which told him to expect to net £12,000. But before Aldo received anything, Lothbury's accounts were frozen by Barclays bank.
Lothbury is run by Daniel Mack, 42, while Freedom was set up by his longtime associate Ronnie Bramley, 64, from Leeds (below).
Lothbury is now in the hands of administrators and barely £500,000 is left of the £764,000 pension funds paid in by at least 27 victims.
Before the accounts were frozen, £15,000 was transferred into Mack's own account, £9,500 withdrawn in cash and £65,000 went to the Dan Group, a private equity firm which is run by Mack and Bramley.
The administrator's fee has already topped £100,000 and if Aldo does get any money back he could be facing a £11,000 tax bill for drawing early on his pension. High Court judge Master Leslie, at a hearing to decide the fate of the frozen money, spoke of "a good deal of chicanery
going on" and warned that the poor customers would be
"It's highly unsatisfactory," he also said.
"The police won't get involved because it's too complicated.
"The Serious Fraud Office isn't interested because it isn't over £25million."
He added: "People like Mr Zanetti have to end up paying for it all themselves."
Not that Mack has any sympathy at all, telling us: "The clients have got absolutely no clue about anything to do with pension law."
He denied operating a pension liberation scheme but refused to explain how it worked.
And he insisted he was entitled to spend the money he had earned in fees.
"Don't ring me again, you know f*** all about pension schemes," Mack added.
"Nobody is untouchable. I know your name and I know where you work and I'm telling you not to ring me again.
"Don't f*** with the wrong people, do you understand?"
After that outburst he then oddly insisted: "I'm a very straight guy.
"If you knew who I was you would have a lot more admiration for me."
Bramley was unavailable for comment.
DESPERATE for extra cash, recruitment consultant Alan Parker, 40, wondered if he could tap into his pension.
An online search led to Sun Money of Stockport which claimed to have a tax-free way of doing just that.
Its "expert" Mark Lowe explained that Alan's pension would be transferred to a Belize company called Axiom, which would return it as a "non-repayable loan". Axiom and Sun Money would take a £19,000 fee, leaving Alan with £53,000.
Lowe claimed the "bullet-proof" scheme was registered with HMRC and "there's no tax implications".
Thankfully Alan ran a mile - which is what the Pensions Regulator advises because pension-release schemes can leave you with huge tax charges.
It warns: "Alarm bells should ring if a scheme charges substantial fees, the sales patter involves references to legal 'loopholes', loans, an arrangement having no tax consequences, new or creative investments, often overseas, and claims that it is registered with HMRC or The Pensions Regulator."
Which is Sun Money to a tee.
The company was set up last year by Barry Neild (above), 55, who told us: "We don't do pension liberation, we are not selling the product, we are processing it on behalf of Axiom."
He said that he had passed around 50 clients to Axiom for a 2.5% fee, adding: "We have no record of anybody having any problems with the tax man."
We tracked down Axiom not to Belize, but to Widnes, Cheshire.
No one from the firm has replied to our questions.
HMRC wouldn't comment on specific cases but a spokesman had this to say:
"A loan by a registered pension scheme to a person that is a member of that scheme will always be considered an unauthorised payment. Unauthorised payments are subject to the unauthorised payments tax charges.
"HMRC works extremely closely with other regulators in a combined attack on pension liberation activity. We have, jointly with other regulators, publicised the dangers of getting involved in these scams and that people should be extremely wary - large tax charges apply and they could well end up with nothing.
"HMRC will not hesitate to act against those who misuse pensions tax relief - we will, where necessary, prosecute - the recent sentencing of 2 individuals to 8 ½ years imprisonment demonstrates that very clearly.
"The tax charge will be on the whole amount of the drawdown, not the net amount the customer receives, so lets say I draw down £100,000 and get charged £50,000 by the firm selling me easy access to my pension.
"The tax charge will be on the whole amount taken from the fund 55 per cent of £150,000, leaving me with a tax charge £82,500 and a net loss of £32,500.
"We register thousands of schemes a year, it's not meant to be a quality mark, all it means is that a firm is registered so it can claim tax relief on pension contributions.
"Any one offering pension liberation schemes is selling financial misery on two levels, one the unfortunate taxpayer will be left with a large tax bill and also have to pay heavy fees to the pension liberation firm.
"They will be left in penury in their latter years as they wont have a pension to draw down on.
"When any pension scheme is registered with us, we make clear that the conditions to be a registered pension scheme must continue to be met, and that compliance checks are carried out.
"Our compliance teams have directly intervened to tackle schemes directly involved in liberation and acted to stop other schemes being misused by third parties."