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Friday, 19 April, 2002, 16:15 GMT 17:15 UK
Warning over pensions scam
Pounds
Inland Revenue is investigating schemes
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By Sarah Toyne
BBC News Online personal finance reporter
line

People are urged to be vigilant over a new scam, which is rapidly gaining a foothold in some of the UK's most needy communities.

The scam is called "Pensions Liberation" and targets people who have been made redundant by promising to unlock their company pension scheme.

The pension liberator takes a 20 to 30% cut of funds, while the new owner of the pension then pockets the rest.

As many as seven of these companies are believed to be being investigated by the Inland Revenue, although it refused to confirm or deny this.

Pension liberation

A source in the pensions industry told BBC News Online that sales reps were signing up people around housing estates, and targeting areas where there have been mass redundancies.

Focusing on these areas was an easy way for fraudsters to get their money on lucrative company pension schemes.

This is because unlocking a company pension scheme appears more attractive than paying for extortionate credit through door-to-door loan sharks.

He said: "It's attractive, because the rates offered are better than many loans or other credit deals. They are saying transfer to us and you will be able to get your money in a more desirable way."

But there is now real concern that people may lose their pensions.

Even if they do get their money, they will be hit with a 40% tax liability on the full fund, including the fee to the liberator.

Individuals could then face problems with the Inland Revenue if they fail to comply with these tax obligations.

A spokesman for the Inland Revenue, issued a statement to BBC News Online.

She said: "It is important that pension funds are used to provide people with income in retirement.

That is why the Government gives them generous tax treatment. If funds are used in other ways the Inland Revenue will take the appropriate compliance action.

This can involve the individuals who access their pension funds improperly in a substantial tax liability.

See also:

17 Apr 02 | UK Politics
Budget speech in full
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