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Regulators warn against pension cash "predators"

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Regulators and Government bodies are launching a crackdown on pension "predators" who tempt people to cash in their pension fund before retirement.

Pension liberation schemes encourage people to access their pension savings before the age of 55.

However, campaigners fear that people are not always being made aware that the tax charges and fees from doing so could wipe out most of their pension pot, leaving them with little cash for their retirement.

Accessing a pension before the age of 55 can result in an "unauthorised payment", which can attract significant tax charges and penalties.

According to research published today by the Pensions Regulator, the amount of money accessed early from pension pots rose from £25 million at the start of 2010 to £200 million at the end of 2011 and stands at "several hundred million" to date.

The campaign, which is also being backed by the Pensions Regulator, the Financial Services Authority, HM Revenue and Customs and the Serious Fraud Office, warns that people should be wary if they are approached by text or cold-callers about their pensions.

They should also watch out for companies offering a "loan", a "savings advance" or "cashback" from a pension, as well as any reference to "loopholes" or overseas investments.

Pensions minister Steve Webb said: "Money in a pension is there for retirement and should not be released before at least the age of 55.

"The Government is investigating a number of schemes where firms appear to be preying on people when times are tight, and I am working closely with the Pensions Regulator to ensure rules are not being broken."

"The pensions industry needs to do what it can to protect members from these offers," said Bill Galvin, the Pensions Regulator's chief executive.

"There can be a huge sting in the tail for those who are tempted by the sales patter," he added.