Have you been approached by firms that promise you instant cash from your pension fund? This known as pension liberation, and involves taking cash from your pension fund before you reach the retirement age set by your pension scheme.
Unscrupulous firms persuade individuals to apply to move their pension funds out of their current scheme, in order to permit an early release of funds, either by a direct transfer out or by a loan. In some case the individual is told there are no tax implications – but there are.
If an individual gains access to their pension savings before their scheme-set retirement age, that individual will be liable to a 55% tax charge on the extracted funds.
This tax rate applies to all taxpayers whatever their marginal rate of income tax. It also applies if the monies are repaid back to the pension scheme. It is the individual who must pay this tax charge, not the new or old pension scheme, or the firm that organised the switch of funds.
Pension funds can be safely transferred from one scheme to another, but if you want to do this you should get advice from a qualified financial adviser who is registered on the financial services register.