Court papers recently released have revealed new steps being taken to protect the public from controversial pension 'unlocking' schemes.
The papers show that a freezing order was granted by Mr. Justice Henderson in the High Court on 17 June preventing three entities, including Ark Business Consulting LLP, from moving assets of up to £1,083,415 from England and Wales.
Ark Business Consulting has been closely associated with the development of pension 'unlocking' or 'pension reciprocation' arrangements.
These schemes apparently offer the chance to release as much as 50% of an individual's pension fund before the member has reached 55 - the minimum legal age for vesting a pension.
The schemes claim to get round pension rules by transferring the funds to a new scheme, and with a loan then being made to the transferring member from another (separate) scheme administered by the same party of up to 50% of the funds transferred. The new 'master scheme' is then typically invested in assets which- theoretically- yield returns to top up the pension pot to its original level.
The schemes have attracted criticism in recent weeks from both HMRC and the FSA. In June, the City watchdog urged investors to be "extremely cautious" about offers to unlock pensions, while HM Revenue & Customs (HMRC) warned that it could levy penalties of up to 70% of a fund if members unlawfully withdraw savings.
Brian Spence is named in the Court document as representing Dalriada Trustees Ltd, which brought the action. He says that the freezing order is "an important step forward in litigation commenced in an effort to protect members' interests".
In a written statement Spence says:
"It is our belief that Ark Business Consulting is responsible for several products which may circumvent the requirement that UK pensions schemes are not allowed to pay out cash to members other than in strictly limited circumstances. We further believe that schemes of this sort have been marketed at people who - through no fault of their own - have not fully understood their import, and who do not realise that they could potentially be putting a substantial proportion of their pensions savings at risk."
Ian Gordon, a Partner specialising in Pensions at McGrigors, the law firm which is acting on behalf of Dalriada Trustees, says that a message needs to go out about the dangers of these 'unlocking' schemes. He says:
"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."
(1) About Dalraida Trustees
Dalriada Trustees Limited is a leading professional trustee with offices in London, Glasgow and Belfast.
(2) About McGrigors LLP
McGrigors is a leading law firm with offices in London, Edinburgh, Glasgow, Belfast, Aberdeen, Manchester, the Falkland Islands and Qatar. With around 100 partners and a total of more than 700 staff across the UK and overseas, McGrigors is well placed to advise clients, including national and multinational organisations in the private and public sectors, on a wide variety of commercial issues. McGrigors is one of the UK’s top 50 legal firms, and was named National Law Firm of the Year 2010 by The Lawyer magazine.
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