An undisclosed number of individuals who illegally accessed their UK pensions before the age of 55 are being told they must pay as much as 70% of the amount they took out of their pensions in penalties and tax to the government.
HM Revenue & Customs today confirmed the general facts of a Telegraph story last week that said “thousands of victims of pension liberation scams” were being required to repay “millions of pounds”. However, an HMRC spokesman declined to give details on the tax authority’s actions, including how many individuals were being sent the letters, or what the time frame of the mail campaign was.
He stressed that those receiving such letters had 30 days in which to appeal, and would be able to request any tax owing to be postponed pending the outcome of their appeal.
In an emailed statement, the HMRC spokesman told International Investment: “We do not discuss individual cases. We apply the tax legislation fairly and consistently in line with the rules, but try to be as supportive as possible for those who have made a genuine mistake.
“Tax reliefs are given to support the building up of a pension pot for later in life, which is why accessing it early through a so-called ‘pension liberation scheme’ can mean a significant tax charge.
“We aim to deal with all cases as quickly as possible – and anyone with concerns should contact us as soon as they can, so we can support them to rectify any issues.”
According to the Telegraph article, the amount UK savers “liberated” from their pensions annually increased dramatically to £400m from £25m in the three years to 2013. HMRC declined to comment on these statics.
Under UK law, people aren’t allowed to take money out of their pension pots if they are under the age of 55, unless they are in ill health. UK tax officials argue that those who accessed their pensions early knew that what they were doing was illegal, but some individuals who did so after transferring their pensions to schemes located in jurisdictions which permit early pension access claim they thought that this meant it was okay.
The Pensions Regulator has a page on its website that provides information about pension scams, how they typically operate and how individuals may protect themselves. It may be viewed by clicking here.