Lawyers working for pension regulators have frozen more than £1 million in bank accounts of a firm advertising controversial pension unlocking schemes.
Judges at the High Court in London ordered the firm running a pension busting scheme to hand over control of the accounts to lawyers and trust administrators working for The Pensions regulator.
Around 400 investors paid £25 million to a master pension scheme run by Ark Business Consulting. The scheme was labelled a ‘fraud on the power of investment’ in court.
Ark Business Consulting then paid 50% of the value of the pension funds by way of a loan from another pension investor in the scheme in a workaround designed to let pension investors aged under 55 access the money in their funds.
UK pension rules do not allow retirement savers under 55 to access pension funds except for in extreme circumstances, like having to give up work early due to a medical condition.
The court was also told Ark invested in ‘dubious assets’ like a £4 million property development in Cyprus.
About £9.9 million is still in the Ark Business Consultant bank accounts. The money was raised from pension reciprocation plans advertised as a way to unlock a pension early.
Pension savers are likely to find their funds are worth less than the cash paid in to the scheme and they must repay any loans they have received plus tax penalties as well.
HM Revenue and Customs and the Financial Services Authority (FSA) have recently spoken out against pension unlocking schemes.
The FSA has warned investors to be “extremely cautious” about unlocking schemes that were described as risky investments.
Pensions partner Ian Gordon of law firm McGrigors led the action in court against Ark Business Consultants.
“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,” he said.
