What is pension liberation?

Pension liberation is normally linked to fraud and accessing pension benefits early. Here we explain what it is and what to be aware of.

Can I release money from my pension early?

Most people shouldn’t access their pension before they turn 55 (57 from 2028). Doing so can result in significant penalties.

To access your pension early without penalty, you’ll need to meet one of the following criteria:

  • you’re forced to retire early due to ill health
  • you’ve been medically advised that you have less than 12 months to live
  • you have a special type of pension that can be accessed at an earlier age (some athletes have these, since they’re not expected to compete past a certain age)

If you don’t meet the above criteria, it is still technically possible to access your pension early - there are no laws that prohibit it. However, doing so is known as making an ‘unauthorised withdrawal’.

The cost of accessing your pension early without meeting the above criteria can include:

  • a tax bill of between 55% and 70%
  • a charge of up to 20% of the value of your pension pot

In some circumstances, this can wipe out your pension entirely. In this case HMRC can still seek tax charges, meaning you can lose your pot plus you’ll need to pay an HMRC tax bill. For this reason, it’s highly recommended that you speak with an independent financial adviser first.

How can I access my pension fund before the age of 55?

If you’re able to access your pension early due to ill health or have a special type of pension, you simply need to contact your existing pension provider. They’ll then guide you through your options, which may include:

  • transferring all the money in your pension pot to your bank account
  • taking out a lump-sum and leaving the rest to grow
  • taking out smaller amounts on a regular basis
  • purchasing an annuity

Pension liberation scams

Unfortunately, there are scammers who promise to help you ‘liberate’ your pension without penalty using tax-loopholes. They’re lying. There’s no way to access your pension early and not pay a tax penalty without breaking the law - in fact, pension providers are required to notify HMRC when you withdraw your pension before the age of 55 so that they’re able to recover the necessary tax payments.

Early pension release scammers often work for firms that offer personal loans or cash incentives to access your pension early. And because they claim there’s no risk, their proposition might sound appealing to some people.

An additional risk of using a firm like this to access your pension early is that they’ll usually ask you to transfer your money into an unregulated scheme promising high returns. Doing so risks losing your pension to bad investment decisions or fraud.

It’s not uncommon for a pot to be completely eroded through commissions and investments in complex, unregulated products, often offshore, that are structured to give kickbacks to the scheme. Many people lose everything but are too embarrassed to report it to the police.

How to avoid pension liberation fraud

If you suspect you’re being targeted by pension liberation scammers, contact Action Fraud on 0300 123 2040. This is the UK’s national reporting center where all fraud can be reported.

Additional tips to prevent falling victim to pension liberation fraud include:

  • approaching any cold-calls or unexpected emails with scepticism - if their offer sounds like it’s too good to be true, it probably is.
  • calling the government’s Money Helper pension service on 0800 011 3797 - they’ll give you free impartial telephone guidance if you have any concerns or worries.
  • making sure that anyone providing you with financial advice is approved and regulated by the Financial Conduct Authority (FCA). If they’re legit, you’ll find them listed on the FCA register.
  • asking your existing pension provider to check the HMRC registration of the firm you’re transferring money to (if you plan on transferring money to them).
  • taking your time before making any financial decisions. A key tactic scammers often use is to put time pressure on you so that you’re more likely to make a rash decision.
  • never handing over any personal financial information to anyone you don’t trust.

If you’re thinking about accessing your PensionBee pension early, call us first on 020 3457 8444.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

Are you saving for your retirement?

Sign up to PensionBee and we’ll combine your old pensions into a new plan that you can manage online.

Get started now

Mobile PensionBee analytics chart
Mobile PensionBee analytics chart
Apple Store logo Google Store logo

Have a question?Call our UK team020 3457 8444

Monday-Friday: 9:30am-5pm