IFAs sound the alarm on pension unlocking
Nigel Green, chief executive of the deVere Group, and Mark Ireland, financial planning consultant for Hertfordshire-based Richmond House Financial Services, said they were highlighting public warnings from industry and government about the schemes, as revealed in a story in FA’s sister publication, FTAdviser.
Mr Green said: “We have long been warning against these ‘pension-busting’ schemes that offer investors the possibility of taking enormous, tax-free sums before retirement.
“The charges on unauthorised payments can easily escalate to a shocking 70 per cent, meaning there will be very little, if anything, left in your pension pot when you come to retire. Investors should steer clear of schemes that promote withdrawing vast sums of capital out of their pensions before they reach the age of 55.”
He said another reason to avoid the schemes was because there is a possibility that HM Revenue & Customs would declare such transactions void as they are in direct conflict with the aim of providing income for retirement.
Mr Green added: “deVere is vehemently opposed to pension unlocking schemes of this nature as we believe they risk impoverishing people in retirement and that they could, ultimately, be banned by the UK tax authorities.”
Mr Ireland said: “I haven’t seriously considered using pension unlocking for clients. They appear to be far too likely to cause problems for the client and, therefore by default, me in the future, so the risk is too high on all fronts.
“Where a client is genuinely moving overseas then a qualifying registered overseas pension scheme may be applicable but again it looks more and more likely that these won’t stand up to HMRC scrutiny and legislative change.”
The comments came after the HMRC issued fresh calls to consumers to avoid such schemes.