Personal PensionOct 24 2013

Regulator has £185m active pension liberation problem

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

The Pensions Regulator currently has 27 open pension liberation cases, worth £185m of scheme money, Steve Webb, pensions minister said.

However, cumulatively pension liberation is a £420m problem, Mr Webb said.

In a work and pensions committee session, which took place yesterday (23 October), Mr Webb praised the action that HM Revenue and Customs took this week to make it harder for pension liberation to occur.

Earlier this week, the revenue responded to calls from the industry to tighten up its pension scheme registration system to limit potential for liberation fraud by ditching its “process now, check later” approach and implementing a system of risk assessment prior to registering a scheme.

The revised approach, effective immediately, means occupational pension schemes will no longer be registered immediately upon receipt of a completed form.

Mr Webb labelled this a “fantastic” move, adding “this will also allow schemes to be de-registered much more easily and this will tackle inflows”.

He added that one challenge facing pension operators is that “some people are just desperate for the cash”.

He said: “They want the money and don’t want too many questions asked and the difficulty for us is they will insist the money is transferred and pensions schemes may find it difficult to say no.”

There is a 55 per cent tax charge for early pension access and Mr Webb added that some people “don’t care”

He said: “They just want their money so that’s a bit of a challenge there...that schemes are under pressure to do transfers”.

Mr Webb praised providers, stating that “intelligence sharing is growing” as pension liberation schemes are becoming more sophisticated and can look like a “normal” scheme.

He said: “But we are turning a corner on this.”

FTAdviser previously revealed that Hargreaves Lansdown wants the industry to work together on a pension liberation firm ‘watch list’, as it is concerned that pension liberation will ramp up when proposals for automatic transfers as part of the government’s ‘pot follows member’ initiative are implemented.

John Lawson, head of policy at Aviva, previously told FTAdviser that pension liberation was a £600m problem, adding that Aviva has stopped 250 people transferring their pensions to pension liberation schemes, and that this alone “amounts to millions”.

Earlier this week, the National Crime Agency said that pension liberation has cost the UK more than £500m to date, as it continued to alert internet registries to pension liberation websites.

More than 10 pension liberation websites have been taken offline after the NCA alerted internet registries.