HMRC demands victims of pension fraud are taxed on stolen money

Posted by Tom Blandford in Personal Finance on 29 January 2016 - Tom is a Credit Analyst at checkmyfile

Since April 2015, pension scheme members have been able to access their pensions in new ways. As a result, con artists have flocked to pension scams in order to defraud the most vulnerable members of society.

Pensions liberation as it is now known, is a sophisticated scam that leads victims to believe their lifetime savings are being invested into get-rich-quick schemes before transferring it to a fraudster’s bank account. Many fraudsters also make bogus claims such as being able to access the victim’s pension before they are 55 years old, which would not be possible under normal circumstances. If the victim is under 55 years old, then ordinarily they would not be able to release their pension, unless they are in poor enough health to warrant early access to their pension.

After the age of 55 however, any withdrawal to a pension fund is subject to 55-70% tax. Even in the event that this withdrawal is made at the request of fraudsters, the withdrawal is still taxable, essentially charging victims on top of the money stolen from them by fraudsters.

Retirement Advantage, Andrew Tully says that unless you are seriously ill, any pension cash withdrawn before 55 is treated as an unauthorised payment and subject to tax at least 55% and sometimes 70%.

Tully says, “You will have to pay this charge even if you did not understand or realise you had broken the rules.”

Chairman of campaign group, ACA Pension Life, Angela Brooks, accused HMRC of tactically sending out last-minute demands to ensure that any appeals would be unsuccessful in reclaiming tax from liberated pensions and said it shares the blame for the fraudulent activity by registering pension schemes without due diligence.

“It is a heartbreaking and seemingly never-ending story. We hear about new scams and more victims every day,” She adds.

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