24 October 2019 | Comment | Article by Neil Stockdale
We have previously reported on a scam warning issued by the Insolvency Service following the winding up of Fast Pensions Limited and five other related companies. You can read more about that here.
More details surrounding these pension transfer scams have now come to light in an appeal to the First-tier Tax Tribunal.
The appeal concerned a Mr West who was offered a loan by a company called Blu Funding Corporation Ltd. The company had ‘cold called’ Mr West about a loan which interested him as he had been in ill health and as a result was in some financial difficulty. Mr West agreed to a take out a loan of £11,650.
Mr West was contacted shortly afterwards about his pension arrangements and it was recommended that he transfer one of his pensions to Fast Pensions Ltd. Unknown to Mr West at the time, the loan from Blu Funding was effectively funded from his pension funds.
Mr West was later subject to an unauthorised payment charge from HMRC of 40% in respect of the loan. An unauthorised payment charge can arise when funds are withdrawn from a pension fund that should have been declared to HMRC, this practice of seeking to unlawfully extract pension funds is known as ‘pension liberation’.
Mr West appealed the tax charge but lost his case. The Tribunal Judge dismissed the appeal finding that the loan was an unauthorised payment from his pension.
The Judge did however, comment that he was satisfied that Mr West and his wife were the ‘….victims of exploitative and untoward behaviour by the promoters and orchestrators of a pension liberation scheme. They were misled and taken advantage of by these individuals at a vulnerable point in their life when they faced difficult financial circumstances.’
It was clear that Mr West had no intention to misuse or liberate his pension and it was accepted that he did not know of the connection between the pension transfer and receipt of the loan at the relevant time. Despite this, Mr West and his wife have now suffered serious financial consequences not only relating to the loss of the majority of his pension but also the repayment of a loan at twice the amount borrowed and a tax assessment from HMRC on top.
Sadly, the facts of this case illustrate the usual hallmarks associated with an illegal pensions liberation scam such as:
- The consumer was cold called;
- Cash incentives or cash loans were offered;
- Mis-leading and incorrect advice was provided to the consumer.
The decision demonstrates quite starkly that the risks of pension transfers go beyond losing the pension funds concerned. It is likely that many others in the same situation as Mr West will face similar losses as a result of fraudulent schemes and scams of this nature.
If you have transferred your pensions into a Fast Pensions scheme or any similar scheme and are concerned about your pension or potential tax liability, please contact the Financial Mis-selling team who may be able to assist with a legal case to help recover some or all of your financial losses.