More than £17 billion has been withdrawn legitimately from pensions in the form of cash lump-sums and annuities since the new freedoms were introduced in 2015. But the new freedoms have brought new dangers.

Some companies are now specifically targeting the under-55s, telling them they’re able to access their retirement fund.

While this is not necessarily illegal, it is an unauthorised payment from your pension (apart from two very specific exceptions) and therefore it should certainly be avoided because you will end up losing a lot of money.

Why will I lose money?

There are two ways you’ll be hit in the pocket by trying to access your pension before you turn 55.

First, the company unlocking your pension will charge fees. This can be as much as 30% of the amount you’re taking out.

Your pension provider will then tell HMRC you’ve withdrawn this money – they’re required to do this by law. You will then be hit with a tax bill of 55% on what you withdrew.

This means you could lose up to 85% of what you wanted to take out!

What if I didn’t know about the tax bill?

Doesn’t matter, you still have to pay. If you took the money out, even if you didn’t know about the tax bill, offer to pay the money back into your pension, or have already spent it, you will have to pay up.