The Pensions Regulator has launched a crackdown on scammers who claim to be able to release your pension cash before retirement.
The Pensions Regulator has launched a crackdown on "predator" companies which promise to give savers early access to their pension funds, for a hefty price.
Thousands of people have fallen prey to these scams because they aren't given the correct information and often lose around half the funds in a pension pot in return for releasing the cash early.
But a huge Government-backed campaign has now kicked off, warning people of the dangers of this kind of fraud.
Pension liberation fraud
Hundreds of millions of pounds is thought to already have been "liberated" this way, with thousands of people affected.
The main way companies get in touch with people is via unsolicited phone calls and texts. With job security low and debts on the rise, it's easy to see why some are susceptible to this kind of fraud.
The language used often refers to a "loan" or "cashback" from your pension with references to "loopholes" or "overseas investments".
The pension holder, who is usually desperate for cash, will "liberate" their pension early, so they have the cash to pay for more immediate things. They do this by moving the money from either a workplace or personal pension into a savings pot, via an administrator or an introducer.
But many people are misled, or not told that they will be charged for doing so. This is firstly through the astronomical fees these companies charge, and secondly through a massive tax bill from HM Revenue & Customs (HMRC) once the money is in a savings account.
To make things worse, what is left of the pension fund is then invested in unregulated and risky investment structures.
These penalties combined often amount to half the size of the pension pot – so savers are effectively being robbed of half of their retirement savings.
The campaign is aimed at both pension savers and industry professionals.
Action packs have been created giving more information about the dangers of pension liberation with the aim of reducing this kind of fraud. These will be sent out to anyone transferring their pension funds.
The whole thing has been organised by the Pensions Regulator along with a number of agencies such as the Financial Services Authority, the Serious Fraud Office and the Pensions Advisory Service.
People who think they've been victim to this kind of fraud can contact Action Fraud
or call 0300 123 2040.