The financial services industry is cracking down on pension liberation by forming a new trade body to regulate transfers between Qualifying Recognised Overseas Pension Schemes (QROPS), SiPPs and SaSS pensions.
The Pension Liberation Industry Group aims to publish a set of standards to govern switching pensions between workplace pensions in a bid to banish rogue advisers from the industry.
The group is made up of providers, trustees running schemes, trade bodies and lawyers.
Pensions minister Steve Webb has also given the group his seal of approval.
The first objective of the group is to establish an industry-wide code of practice to manage how pensions are transferred.
Code of conduct
The code will call for:
- The receiving scheme will have to provide evidence to prove the transfer is to a bona fide fund
- Time limits for the transfer of funds
- A discharge process and transparent communication to track the transfer is not to a pension liberation scheme
- A red flag system to alert members of suspected pension liberation schemes
- A badge for consumers to identify The Pension Liberation Industry Group members to give them confidence they are not dealing with suspected pension liberation outfits
Margaret Snowdon, chairman of the Pensions Administration Standards Association, is heading the new group.
“The industry has decided to maintain a set of standards to cover pension transfers as a method of cutting down the number of pension liberation cases,” she said.
“We will be working on guidelines for the industry and talking to the government and other official bodies about making changes to the law covering pension transfers.”
Another leading member is Victoria Holmes, of The Pensions Regulator, which has teamed with HM Revenue & Customs (HMRC) and the police in an ongoing campaign to stamp out pension liberation scams.
“There appears to be no way we can stop pension predators snatching the hard-earned money of retirement savers,” she said.
“But the industry is in the front line of the battle and has decided to co-operate to do more to help flush out the scammers.”
Pension liberation firms release cash for retirement savers under 55 years old who legally cannot access payments from their pensions.
HMRC regards unlocking pensions for cash as an unauthorised withdrawal and charges a 55% tax charge on the sum, while many pension liberation firms charge fees as high as 30% of the transfer fund.
Together, the charges, fines and penalties can almost wipe the value of a pension fund.