Providers have acknowledged adviser “frustration” at the increasing number of pension transfer requests that are being refused, particularly to small self-administered pensions which many say are an increasing target of pension ‘liberation’ scammers.
Richard Mattison, director at Ssas administrator Whitehall Group, told FTAdviser he has had five transfers to what he described as “genuine” schemes blocked by five separate providers in the last two months alone.
In all cases the providers, which include Aviva, Scottish Life, Legal and General and Prudential, cited concern that the schemes could be a guise for a pension liberation, or ‘unlocking’, fraud.
Mr Mattison said: “They are refusing to transfer money to schemes without giving any reason whatsoever. We aren’t the only firm that has been affected by this.”
As a result of the most recent block by Aviva, a client that was seeking to use a Ssas to puchase a commercial property was unable to do so. In addition to the frustration at the request being refused, the client is also out of pocket due to having to pay advisory fees, Mr Mattison added.
Mr Mattison said: “The deal is going to fall through and the client is going to pick up all the costs.”
John Lawson, head of policy for pensions and investments at Aviva, told FTAdviser he understood advisers’ frustrations but said providers are being forced to take on the role of regulators due to a lack of action by the Pensions Regulator and Financial Conduct Authority.
While the Pension Scheme Act 1993 requires providers to process any genuine transfer, that is to say to a scheme that is registered with HM Revenue and Customs, there have been suggestions that due to the growing spectre of pension liberation regulators are taking a back seat and are unlikely to reprimand firms that refuse to do so.
Aviva previously claimed it had blocked about £50m of transfers in the first four months of 2013 alone. Fellow provider LV= has also admitted to blocking suspicious transfers, while others including Aegon and Suffolk Life have also confirmed they have blocked a number of transfers.
Mr Lawson said pensions liberation scammers are increasingly using Ssas to hide their schemes as they are easy to set up and do not require the use of a professional administrator, which is prompting caution in relation to the products among providers.
Mr Lawson told FTAdviser: “I don’t want to detail what our due diligence process is because... the liberators pick up on that and try and find back doors.”
“There are things the regulators could do but they aren’t doing anything at the moment other than trying to tackle things at the back end after the transfer has taken place. We should be trying to stop this further upstream.
“We don’t have an agenda and I don’t think any other provider has an agenda. It’s going to be frustrating for advisers in the short term but I would argue that it is not our fault.”
He added that Aviva has no desire to block genuine transfers and if it unwittingly does, the adviser in question should persistently contact the company to ensure it goes through.
A spokesperson for Scottish Life also admitted taking a closer look at Ssas than at other types of transfers: “Scottish Life doesn’t refuse Ssas transfer requests; we just make some additional checks to satisfy ourselves that it’s a legitimate transfer and not pensions liberation.”
A spokesperson for L&G said: “We have seen a mix of scheme types, including Ssas and Sipp, being used as a vehicle for pension transfers. The danger is that the fraudsters are likely to be skilled at moving between different product and scheme types.
“As such, the ultimate solution is likely to sit with scheme registration, both in the initial registration process at HMRC and with the Pension Regulator identifying schemes already registered that need to be deregistered. We believe that the regulators are working hard to address this issue.
“Although we recognise that pension providers can help to identify fraudulent liberation schemes, this carries a very heavy administration burden and cost. Such cost is likely to ultimately work its way through to customers. We are keen for the industry and regulators to come up with efficient ways to identify and deal with such schemes.
“Currently the majority of the burden appears to be levelled at administrators and trustees, which is leading to delays in paying transfers to schemes that subsequently turn out to be legitimate.”
Prudential could not be reached for comment at time of writing.
