Regulator shuts down £134m schemes charging 11% fees

Five interconnected pension liberation schemes which had amassed £134m from 1,400 individuals and raked in around £14.7m from 11 per cent transfer fees, have signed a legally binding agreement preventing further transfers following a court ruling earlier this year.

The Pensions Regulator had commenced High Court proceedings in July 2013 against A Admin Ltd, Warwick Pensions Administration Ltd, Lincoln Pensions Administration Ltd, Baxendale Walker LLP, and Paul Baxendale-Walker.

The regulator was concerned that the schemes were established to provide a cash payment to the member rather than providing retirement benefits and that this constituted misuse or misappropriation of pension scheme monies as defined in the Pensions Act 2004.

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The schemes operated according to complex arrangements that purportedly enabled funds to be ‘lent’ to the member via a company under the member’s control, which would become their employer under one of the schemes.

They sought to allow members to access their pension funds as cash through a supposed legal ‘loophole’, but in May this year the High Court ruled that this supposed gap in the law did not exist, finding in the regulator’s favour on three preliminary legal issues.

The defendants have now signed a legally binding agreement confirming that the five schemes are wound up, relevant defendants no longer act as trustees of the schemes, and the schemes are not able to accept transfers from any other pension schemes.

Andrew Warwick-Thompson, executive director at The Pensions Regulator, called it one of the biggest, most highly-organised pension liberation exercises he has seen.

“It spread quickly as a result of marketing by a network of introducers who attracted individuals by direct marketing including cold-calling. Fees of 11 per cent - totalling more than £14.7m - were charged to implement these transfers.

Mr Warwick-Thompson explained that those caught up in these schemes may face tax charges, even if they were told that the payments would be free of tax.

“This would have been the case whether or not we had intervened. Our aim was to ensure that the schemes were closed before more people were enticed to transfer their pension pots into these schemes.

He added: “Where members feel they have lost out, these legal proceedings leave the way open for them to take their own legal action.”