What is "Pension liberation"?

Pension liberation is the practice of cashing in a pension early; before the retirement age provided for in your pension scheme rules. The practice will result in a tax charge as tax relief given on pension contributions is clawed back.

Is there a problem with pension liberation?

The practice is discouraged by government because the aim of encouraging pension savings is that people create a pension to live off on retirement. A number of companies are claiming that they can create tax free pension liberation. Some operate high pressure sales tactics and charge large fees for their service. There is the danger of mis-selling because HMRC consider that where an individual is under 55 years old there will be a tax charge.

What is HMRC doing about this?

HMRC has changed its systems for both registering new pension funds and processing transfers of pension funds. In order to liberate a pension the fund has to be transferred to a fund which will allow an early draw-down. It is easier for those selling pension liberation to create their own funds and then they can administer the process. HMRC is aiming to prent registration and then transfer.