Henry Tapper, founder of auto-enrolment service Pensions PlayPen and director at pensions consultancy First Actuarial, has reported seven new master trusts to both Action Fraud and The Pensions Regulator.
These new reports took place in the last week of July. The firm has already reported eight other master trusts, bringing the total to 15, that have been flagged for regulatory scrutiny out of First Actuarial’s universe of roughly 85.
Mr Tapper said: “TPR has warned us off talking to journalists about who they are but we have reported them to Action Fraud and we have reported them to The Pensions Regulator and they are under investigation.
“We don’t know they are fraudulent but they show all the signs of only being there for one of two reasons, either to help people at retirement get their money easily or prior to retirement, otherwise known as pensions liberation... or they are being used for auto-enrolment purposes where the money goes into the auto-enrolment pot never to be seen again and this is not good.”
The Pensions Regulator declined to comment.
Mr Tapper added that the problem with master trusts is that they are incredibly easy to set up, in that all you have to do is apply to HM Revenue and Customs and without any due diligence on the provider they would give approval.
He said: “So you can then say we are an HMRC approved master trust – it means nothing, there is no barrier to entry, and then you can use for little bits of your proposition FCA approved people.”
However a spokesman for HMRC said: “We have an active programme to tackle all attempted misuse or abuse of the pension tax rules and continue our work to identify schemes which seek to abuse them.
“The vast majority of pension funds abide by their legal obligations, but we won’t hesitate to refuse to register a new pension scheme or de-register a pension scheme where rules are not adhered to.
“We don’t treat master trust applications any differently from any other application for registration. All applications are put through the same due diligence and risk assessment process against both the scheme and the administrator.”
Mr Tapper gave three examples of what he perceived to be hallmark signs of scams.
“A couple that we’ve seen have been offering guaranteed returns of 6 per cent. To offer a guaranteed return of 6 per cent after you’ve paid 0.75 per cent guaranteed charge – that’s 6.75 per cent.
“Frankly you can’t make that kind of promise over time so if it looks to good to be true it probably is.
He added that another one that had been found was offering business loans with contributions being made by the members so you could take the members contribution and use them to borrow money for your business.
“That looks to be too good to be true and probably was too good to be true.”
“Then there’s a whole load that talk about being able to do certain things for free – whenever they say they are going to be free I think that is a warning sign, so watch out for loads of services offering to be free watch out for unplausible investment offers watch out for what looked like devious means to use the pension scheme for business purposes.”
In The Pension’s Regulator’s most recent campaign providing guidance on pension scams, Lesley Titcomb, chief executive of The Pensions Regulator said: “The people behind pension scams are shape shifters.
“They are sophisticated and well organised so we have to be resourceful, tenacious and work collaboratively with government, law enforcement and other agencies to educate the public, disrupt the activities of scammers and take legal action where necessary. There is no single organisation or agency which can tackle scams alone.
“Consumers have their part to play by arming themselves with the facts. In addition pension scheme trustees should be warning members to be vigilant and informed as to the dangers of potential scams.
“Trustees can play their part by directing savers to scorpion material, helping their members to recognise the hallmarks of scams and how to protect themselves.”
Mr Tapper added that master trusts such as Now and Nest and the People’s Pension are at the other end of the spectrum and are “really high quality arrangements” with “high levels of governance”.
“The regulator is trying to find a way to get all master trusts into that space,” he added. “We hope lots of master trusts will aspire to the Master Trust Assurance Framework.”
ruth.gillbe@ft.com
