Doctors have been urged to protect themselves against fraudsters using ‘pension liberation’ stings encouraging victims to cash in their private pensions before they reach 55.

The scams offer to help investors release cash from their pensions claiming it is simply ‘borrowing money’ from their own pension fund. Doing so before the investor turns 55 will generate a tax bill of 55 per cent of the amount accessed (unless you are suffering from ill-health). If it is not declared to HMRC, the tax bill increases with a penalty to 70 per cent of the amount claimed in cash.

Pension liberation schemes have been around for a long time but there has been a rise in the number of cases – and more exotic-sounding schemes – since the new pensions freedom reforms were introduced. There is a general confusion over what people can and cannot do with their pensions, which plays right into the hands of the fraudsters.

Victims will agree to transfer their pension from a legitimate scheme to a new pension set up by the fraudulent company – often based abroad. That company will take a fee for doing so – up to 30 per cent. The leftover funds can be minimal after these fees which are rarely recoverable and any unauthorised payment charges from HMRC when the scheme unravels.

Even where advice is sought from a seemingly reputable UK-based company there can still be issues. There is still evidence of doctors suffering financial losses after investing in illiquid funds or assets held in Self Invested Personal Pensions (SIPP). These investments are often high-risk and unregulated, usually connected to UK or overseas property development but also forestry, solar power or new technologies.

Sadly the investments are unlikely to be suitable for consultants who should be classified as ‘retail clients’. Individuals should be wary of any adviser trying to record them as a ‘high-net-worth’ or ‘sophisticated investors’ – even if they consider that they are, or meet the criteria presented by the adviser. This flattery is not just part of the sales pitch – it means the adviser is able to sell unregulated investments to you and will result in less protection from the regulator when the time comes to complain.

With interest rates failing to beat inflation, normally risk-averse investors can find their attentions turning to riskier alternatives.

To ensure your investments are sound, contact one of our advisers on 020 7636 7006.