A ruling by judges in London’s High Court has torpedoed a campaign by financial firms and regulators against pension liberation.
Hailed as good news for fraudsters, the court decided that pension firm Royal Life had no right to hold up a customer’s pension transfer even though they suspected the destination for the cash was a pension liberation outfit.
The Pensions Regulator, the market’s official industry watchdog, had urged providers to help stall a flood of pension liberation money going to firm’s flouting rules and allowing retirement savers under 55 to access their money.
Royal Life was one of several leading providers to agree to delay transfers if the destination was a suspected pension liberation firm.
The firm told the court that they suspected the transfer to Bespoke Pension Services would leave the saver, Donna Marie Hughes, facing massive tax penalties or losing her money to fraudsters.
Providers cannot delay transfers
Ms Hughes had already had her plea to shift her savings turned down by the Pensions Ombudsman on the grounds she was not paid by the employer sponsoring the pension scheme.
Royal London was concerned the destination pension scheme was a shell company set up for pension liberation and not as a savings fund.
However, the High Court decided that Ms Hughes could transfer her pension and that the receiving scheme did not have to be an employer scheme where she worked or even a trading company.
The pension industry has patiently awaited the outcome of this case, as the ombudsman has 200 similar complaints about delayed transfers awaiting adjudication. Now, pension providers would appear to have no legal right to stop a pension transfer even if they know the money is heading for a pension liberation scheme.
Fear of fraudsters
The law says anyone can withdraw the funds from their scheme, regardless of their age, but anyone under 55 years old has to pay an ‘unauthorised withdrawal’ tax penalty to HM Revenue and Customs.
The penalty is at least 55% of the value of the transferred fund.
The ombudsman confirmed around 80% of the cases queued awaiting the outcome of the case involve transfers to Bespoke Pension Services.
“It is important the law separates genuine pension transfers that allow people to invest as they wish from those that might be fraudulent operations,” said a spokesman for the pension ombudsman.
“This ruling could lead to a flood of fraudsters exploiting retirement savers.”
