Pensions provider Friends Life has declined over 500 requests to transfer clients’ pensions to pension liberation schemes, with the total transfer value of these requests being over £12m.
Friends Life said it has adopted a “hard stance” against pension liberation and is taking a proactive approach to targeting the firms encouraging the practice.
When the company suspects that a member is requesting a potential pensions liberation transfer, Friends Life follows a due diligence process on the request. Friends Life said the process is in line with The Pension Regulator’s recommended checklist and ensures the transfer does not go ahead, when warning signs are highlighted, to protect the long term interests of our customers. The company has identified a significant number of high risk schemes to date.
In addition, Friends Life is issuing The Pensions Regulator customer leaflet to all customers where the transfer request looks suspicious, as well as launching guidance information on the company’s website to help educate customers and enable them to make informed decisions. Any suspicious requests are reported to HM Revenue & Customs and Action Fraud who are the UK’s national fraud reporting centre.
Pension liberation is becoming more common in the pensions industry as a whole, with John Lawson, head of policy at Aviva, previously telling FTAdviser that pension liberation is at least a £600m problem.
Clients can only release funds early if they meet strict criteria, such as having a terminal illness. Otherwise individuals are likely to face unauthorised tax charges of 55 per cent of the entire pot, with penalities potentially taking this as high as 70 per cent.
TPR told FTAdviser that a trustee for an occupational pension scheme can refuse a transfer request on the grounds that the scheme the member wants to transfer to is not one of the destinations allowed for under the Pension Schemes Act 1993.
The FCA regulates self-invested pension providers and does not regulate occupational pensions, which are overseen by TPR.
Sipp operators seeking to prevent the transfer of client funds into suspected pension liberation schemes have been told to seek legal advice by the FCA, but it has refused to confirm it will not take enforcement action over transfer refusals.
Martin Palmer, head of corporate benefits marketing at Friends Life, said: “The fact that the companies instigating pensions liberation transfers and the schemes they are attempting to transfer the funds into are not registered is not only worrying for the industry but could be devastating for the future financial wellbeing of customers.
“The industry needs to take action, sooner rather than later to avoid this becoming the next big scandal and to help safeguard the retirement provision of thousands of people across the UK.”
