The government should introduce legislation which would allow pension trustees to block transfers to suspected fraudulent pension liberation schemes, an associate at pensions consultant and self-invested pension provider Barnett Waddingham has argued.
Associate Ollie Clymo has called for changes to law after police raided several cold-calling pension liberation operations.
Mr Clymo said: “On the one hand the Pensions Regulator is encouraging employee pension scheme trustees to stop members from transferring their funds into suspected liberation schemes but on the other no laws appear to exist to empower trustees to prevent them from doing so.
While the cold-calling operation involved firms operating an explicit fraud that involves clients being placed in non-existent schemes, other pensions liberation set-ups are legal but will likely trigger an authorised tax charge of 55 per cent, or as high as 70 per cent if penalities are applied.
HMRC has previously told FTAdviser there is “no legal loophole” to get around the rules, with only limited exemptions allowing access to pension money before age 55, such as in cases of severe or terminal ill health.
Mr Clymo added: “An urgent change in law is required to protect unsuspecting scheme members from being victims of fraud. Cash strapped pension scheme members are easy targets for these companies but if they are aged under 55 they will come in for a nasty shock when the HMRC demands as much as 55% of their fund for drawing benefits early.”
He requested a list of liberation schemes under investigation be published by the Pensions Regulator in a way similar to the operation of the Financial Conduct Authority which offers a list of boiler room scams on its website.
In the past two weeks efforts efforts on the part of providers to tackle the threat posed by pensions unlocking firms have come to light.
FTAdviser sister title Financial Adviser reported that Legal and General was working on a legal clarification of what constitutes a qualifying pension scheme under the Pension Schemes Act 1993 in order to toughen up the definition and give it more scope to refuse transfers.
Other providers, such as Standard Life, LV= and Zurich, have also revealed they are blocking or delaying transfers in order to combat the rise in liberation schemes.
