Hargreaves Lansdown has called for the industry to work together on a pension liberation firm ‘watch list’, as it warns that pension liberation will ramp up when proposals for automatic transfers as part of the government’s ‘pot follows member’ initiative are implemented.
In an interview with FTAdviser, Tom McPhail, head of pensions research at Hargreaves Lansdown, said the investment firm has blocked a “couple of dozen” of transfers to pension liberation firms.
He added that although The Pensions Regulator is doing “a lot of good things”, it needs to meet with the industry to work out how a ‘watch list’ can be delivered that could lend weight to decisions not to process a transfer.
He said: “We believe it is possible to put one together and we believe it would enjoy widespread support from the industry... it would be instrumental in accelerating the effective interventions and so we would very much like to see The Pensions Regulator work with the industry.
“What the industry needs is probably a mechanism to allow us to share this information and for this information to be shared with us effectively behind closed doors... these rogue elements need to be flagged up.”
While the Pension Schemes Act 1993 requires pension firms to process transfers to schemes that are defined as occupational schemes and registered with HMRC, several providers have admitted they are deliberating either delaying or seeking to block transfers where they suspect pension liberation-style activities.
Where non-occupational schemes such as self-invested pensions are concerned, the Financial Conduct Authority has regulatory oversight and has crucially refused to confirm that it would not take action against firms preventing transfers.
However, a source with knowledge of the approach told FTAdviser that the FCA would be unlikely to do so. Mr McPhail agreed, saying the regulator would be unlikely to bring enforcement proceedings “if firms are doing it in a sensible way”.
He said that Hargreaves Lansdown was praised by the Serious Organised Crime Agency for preventing transfers to pension liberation firms, saying firms should report concerns to the Serious Fraud Office, the Action Fraud Line and the appropriate regulator if they are concerned and planning on refusing a request.
Mr McPhail explained: “It’s about striking a sensible balance and I think that in that situation it is very unlikely that we will get regulatory issues emerging from that.”
Like other commentators, Mr McPhail highlighted that the scheme registration process for trustee-based schemes need to be re-examined, highlighting that the approval and registration process is automated, meaning essentially anyone can start an occupational scheme.
He said this will become more of an issue because of the DWP’s plans for ‘pot follows member’ that will provide for automatic transfers for pension pots that are less than £10,000.
Mr McPhail warned that as automatic transfers will provide a mechanism for pension liberator firms to get to pots by stating that the consumer is one of their employees.
