Pension unlocking - High Court freezes pension reciprocation scheme assets

A High Court judge has issued a freezing order affecting over a million pounds of assets. Papers released by
the High Court revealed that three related firms  - Ark Business Consulting, Ark Commercial Pension
Planning and Ark Commercial Retirement Planning  - had been prevented by Mr Justice Henderson from
moving around £1.08m from the country to Cyprus. The monies frozen relate to fees billed by the firms
when a pension scheme member tries to "unlock" their monies while under age 55. The schemes claim to
be able to circumvent minimum pension age rules by writing loans (of up to 50% of the pension scheme
funds) to members instead of paying pension benefits.

The law firm McGrigors is acting on behalf of Dalriada Trustees and their pensions partner Ian Gordon said:

"Many of these so-called unlocking schemes test the boundaries of what is legal and effective, and everyone should be made fully aware of the risks. The types of organisations who typically market schemes
of this nature are often registered abroad and as such are not regulated by the FSA. We would advise
anyone who is approached with an 'unlocking' or reciprocation proposition to proceed with the utmost
caution. Some press reports have indicated that pensions reciprocation agreements are marketed as a
means to free up investment for capital in overseas real estate ventures, and that type of arrangement
should sound alarm bells."

The Pensions Regulator and the FSA also issued warnings about such schemes last month

"Fryer and Ors v HMRC" - tax on pension death benefits

The recent ruling in the case of “Fryer and Ors v HMRC” is another example of HMRC tightening the screw.

The case of “Fryer and Ors v HMRC” concerned an individual who deferred taking her pension benefits at the notional retirement age of 60 and died age 61. The lady in question had no need for the income at that time having sold her business.  

HMRC successfully contended that the deceased, by deferring pension benefits, had made a disposition for inheritance tax purposes and that the pension death benefits should be chargeable to inheritance tax.

Anyone who has deferred starting benefits from a UK pension may wish to reconsider their position. For those with pensions who have not reached retirement age it may be appropriate to extend the normal retirement age to 75 (assuming that no penalties apply).