HMRC pension liberator tests come under fire

A new ‘fit and proper person’ test for pension liberation scheme administrators has been branded “too vague” by senior industry figures.

At a meeting in April of HM Revenue and Custom’s pension industry stakeholder forum, an update was given to representatives of members from the likes of Nest, the Association of British Insurers and Association of Professional Financial Advisers.

The tax watchdog explained new rules which mean from 1 September the tax office will assess each scheme administrator on their own merits and decide if they are fit and proper to fulfil the role.

Article continues after advert

Also from 1 September changes to the rules around interventions by the Pensions Regulator will allow independent trustees to be appointed without the requirement to take on the tax liabilities of the previous scheme administrator.

However, industry figures said the fit and proper person test “was too vague” and that a system of accreditation could be a better way of driving out promoters of liberation schemes.

In response HMRC explained the fit and proper person test would mirror the current fit and proper person test for charities and confirmed they would continue to engage with the Financial Conduct Authority, The Pensions Regulator and Department for Work & Pensions on the issue.

Industry figures at the meeting also asked what action HMRC takes against pension liberators and if they use their powers to reclaim charges from the schemes rather than the members involved.

HMRC explained that in most cases the trust deeds are written in such a way that the onus falls on the scheme member and therefore the tax office is often unable to pursue the scheme administrator.

Last month FTAdviser reported around 14 per cent of pension schemes have suspected pension liberation fraud in member transfer requests, according to a study conducted by the Pensions Regulator, meaning more than 6,000 schemes are likely to have seen evidence of the activity.

Liberation fraud was a new subject included in the latest iteration of the regulator’s annual scheme governance survey, with the results highlighting just how prevalent the issue has become.

Based on November 2013 data from the Pension Policy Institute which puts the number of schemes in the UK at 44,440, the 14 per cent of 449 participants responding to the survey would equate to more than 6,200 schemes that have suspected ‘liberation’ behind a transfer request.