There are companies in civvy street known as pension liberators which promise to release your pension and lump sum benefits early. Some unscrupulous ones prey on unsuspecting individuals, using the promise of ready cash. Lieutenant Commander David Marsh, Pensions Secretary of the Forces Pension Society, warns against such schemes…


The earliest age most people are legally permitted to cash in their pension fund is 55, other than in rare circumstances such as terminal illness. You can get hold of your money earlier but be prepared to pay a hefty price.

Springing up all over the place, like a tray of mustard cress bursting into life, are pension liberators – companies you can approach or which approach you – promising that those funds that you cannot normally get your hands on until 55, 60 or 65, will be released to you now.

What exactly does liberation mean?  

It’s a misleading term that gives you the impression that the company has found a legal loophole. The primary condition you must comply with is to transfer the value of your pension fund into a new fund run by the company.

What these companies often fail to tell you is that once the money has been transferred and you receive your cash, they will remove up to 30 per cent in fees before you pay a one-off 55 per cent income tax liability charge on the fund’s value for drawing an “unauthorised payment”.

What is being done?

In the case of Armed Forces schemes, administrators are not allowed to transfer to a scheme not registered with HMRC – but protection does not go much further than that.

The outcome of an ongoing court case could make it illegal for such companies to operate as pension schemes; the result is likely to be known in the autumn.


Counting the cost

Pension and lump sum value of £120,000 to draw out £20,000 early:

  1. Company’s charges (30%) £36,000
  2. Income tax charge (55%) £66,000
  3. Money taken out of fund £20,000

Total cost = £102,000
Leaves £18,000 left in pension fund

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