HM Revenue & Customs has put out a fresh warning on pension liberation schemes and clarified where reports should be directed, answering complaints from advisers that a vacuum in oversight had allowed firms to slip through the regulatory cracks.
In a statement posted on its website, HMRC said it is currently working “extremely closely with partner agencies and other regulatory bodies” to “detect, disrupt and deter pension liberation activity”.
However, it said that while a number of regulatory bodies are involved, reports of activity should be directed to the national fraud reporting centre Action Fraud, which will coordinate investigations.
This follows joint guidance issued earlier this year by the Department for Works and Pensions, The Pensions Regulator, the Financial Services Authority (now the Financial Conduct Authority) and the Serious Fraud Office, as authorities launched a fresh clampdown on so-called pensions ‘unlocking’ firms.
Despite garnering the attention of so many bodies, advisers and others have complained to FTAdviser that no single body is taking responsibility for monitoring such schemes and that they have found it difficult to ascertain where reports should be directed.
In March, John Newman, pensions director for Broadstone, told sister title Financial Adviser that despite efforts by The Pensions Regulator, HMRC and the then Financial Services Authority to crack down on pension liberation schemes, all responsibility is in fact still focused on the trustee.
The Pensions Regulator told the paper it has been “clear” that the responsibility for tackling pensions liberation fraud falls upon a number of organisations, as well as trustees and individual scheme members.
In its latest statement, HMRC also reiterated previous warnings that there is “no legal loophole” and that consumers are likely to pay a tax bill of more than half of their pension pot as well as tax penalties.
Typically, pension liberation arrangements involve transferring savings from an existing scheme to another to allow early access to funds. Clients will often in reality be offered a loan from the transferring company, which will take a fee or deduct the sum plus significant interest from the pension pot when the client reaches 55.
Aside from exceptional circumstances, such ‘early’ access is not allowed and will incur a tax penalty of 55 per cent, plus potential charges from the regulator that can take the penalty to 70 per cent.
HMRC previously told FTAdviser that investors should stay “well away” from pension offers that claim to be able to provide loans or release tax-free cash from people’s pension pots before they reach age 55.
Last week, the Advertising Standards Authority demanded that a pension liberation text message campaign be pulled as the marketing company breached its code by not seeking consent from recipients and not disclosing its identity.
