A list of registered pension providers to block pension liberation scams seems doomed to fail if the outcome is anything like the QROPS list published by the tax man.
Pension providers are calling for HM Revenue and Customs to publish the list to help them decide whether a call for a pension transfer is from a genuine scheme and not a fraudster.
This is exactly the purpose of the QROPS list that has landed HMRC in so much trouble in the High Court in recent weeks.
The concept sounds simple – but the execution is a completely different matter.
Using the QROPS list as an example, providers in 46 different financial centres around the world self-certify that their QROPS meet pension rules laid down by HMRC.
Pension problems
Once HMRC receives this self-certification, the scheme goes on the list, which is published fortnightly, and UK onshore providers can transfer pension funds offshore.
The problem comes when the scheme is scrutinised further, sometimes years down the line, and found not to meet QROPS rules at all.
Under pension law, the transfer of tax-relieved funds then becomes an ‘unauthorised withdrawal’ which is taxed starting at 55% of the transfer fund value – and can go up to 75% if further penalties and interest are added.
This has happened in two cases – the Hong Kong Beazley QROPS and the Singapore ROSIIP QROPS.
In the first, HMRC waived penalties and in the second they did not, resulting in a class action by 120 QROPS investors that has left the tax man’s QROPS policy in a shambles.
The weakness of publishing the lists is self-certification. If pension liberation firms can self-certify they meet UK pension laws, then the list has no point and conflict will follow when investors and HMRC argue about whether the transfer was an unauthorised withdrawal.
Duped by fraudsters
In both cases, retirement savers need clarity over the status of the pension providers they want to send their money to.
Simply repeating the errors of the QROPS list for registered pension schemes will not improve matters for retirement savers.
Some are trying to play the system to get at their money early, but many are innocently duped by fraudsters and later face paying a heavy penalty.
What the pension industry needs is clear and transparent guidance from HMRC, which needs to put resources into reviewing registered pension provider applications, whether they are at home or overseas.
Simply blaming the investor for not checking when they do not have the means to do so is not good enough and needs to change soon.
What is the Fault of the Investors, i don’t know ?