Like all successful financial scams, ‘pension liberation’ schemes seem attractive, giving you access to retirement funds before 55, the usual age at which they can be turned into income for life.
Yet as The Mail on Sunday has consistently reported over the past few months, once you scratch the surface, these arrangements are nearly always horribly toxic, leaving victims with a series of unexpected charges and a much-reduced income in retirement.
Charges include a future tax bill equivalent to 55 per cent of the fund liberated plus possible tax penalties for late payment, and of course fees of up to 30 per cent for the company that has suggested the liberation.
Recent arrests in connection with suspected fraudulent pension liberation schemes suggest that at long last the authorities are getting on top of this situation. But liberators abound, with the Information Commissioner’s Office reporting that spam text messages from these companies have more than tripled in the past six months.
More needs to be done to curtail this practice, says the pension consultant Barnett Waddingham.
Although The Pensions Regulator has published a useful guide on the dangers of pension liberation schemes (check it out at thepensionsregulator.gov.uk/individuals), Barnett believes trustees of company pension schemes should be empowered to prevent all such transfers.
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It also wants the regulator to publish a list of companies that are under investigation so anyone who is approached can check it. They are sensible ideas that should be taken up by the regulator.
In the meantime anyone contacted by a cold-calling or text-messaging pension liberator should not be tempted. A far better strategy is to report the firm via actionfraud.police.uk. The liberators should then be incarcerated.
Overpriced Post Office needs to step away from Bank of Ireland ventureLast week I urged Post Office bosses to rethink their joint venture with the disgraced Bank of Ireland.
Today I do so again. Since I last wrote, the Post Office has revealed details of its long-awaited current accounts, which are to be provided by that same financial basket case.
And as I feared and warned, the ‘basic’ current account to be offered by the Post Office/Bank of Ireland will in fact cost £5 a month. That is the account, by the way, supposedly aimed at the lowest earners in society such as pensioners and the unemployed – those who have perhaps never enjoyed the benefits of banking until now, or those with poor credit ratings.
A monthly fee of £5 is a lot of money to these people.
Is this really what we want from our Post Office – horribly overpriced financial services? Deals that are worse value than equivalent offerings from our own greedy (and more or less useless) high street banks?
With six times as many branches as any rival bank, you would think the Post Office should be able to offer a fantastic deal across all personal finance products, but I don’t believe it will.
This is because of the dire financial position of its chosen partner, the Bank of Ireland, which lost £1.8billion last year. Its UK division – basically its mortgage business and its financial tie-ups with the Post Office, some of which are hidden in a company called Midasgrange Limited – lost £310 million. So it is desperate to claw back profit from anywhere – and it is leaving few stones unturned in its quest to do so.
Last year Bank of Ireland increased mortgage rates twice for its UK standard variable rate borrowers. And this year it has taken even more controversial action in increasing the rates of yet another 13,500 British borrowers. Hopefully this action will be challenged in court.
Bank of Ireland has also sought to avoid paying British taxes, being ordered only last month to stump up £30million on historic profits arising from its UK mortgage division. It has been trying to wriggle out of this tax for almost a decade.
British borrowers have borne the brunt so far with rising mortgage rates, but savers also ought to beware as Bank of Ireland is quite open in admitting it wants to cut rates.
It talks in its latest report of the ‘group’s strategy of reducing the price paid for deposits’. That means yet lower interest rates. British savers who have entrusted a total £18.5billion in Post Office savings accounts, please take note.
Post Office bosses have chosen as their preferred partner a loss-making, bailed-out foreign bank. And Post Office customers are paying. The Government needs to get involved, shed some light on this unhappy tie-up – and then end it.
