The relentless campaign to stamp out pension liberation scams is continuing with a crackdown on pension fund registration by the tax man.
From October 21, 2013, HM Revenue & Customs (HMRC) is making the rules much stricter to deter fraudsters from setting up pension liberation schemes.
HMRC runs a ‘process now, check later’ registration process that allows pension funds to self-certify they meet the rules – only to find at a later date that some bogus firms have collected millions of pounds from unwary retirement savers.
The tax man says unscrupulous financial advisers target retirement savers with financial problems and offer them an escape by offering them a chance to take money from their pensions before the payments are due.
To do this, the scammers have set up a registered pension scheme with HMRC, so when a trustworthy provider checks whether they can make the transfer, everything seems above board.
What the new rules do
Once the switch takes place, the pension liberation firm takes a share of up to 15% or more of the fund for arranging the transfer. The rest of the money is swallowed up in worthless investments or disappears offshore.
Meanwhile, the retirement saver faces a fine of at least 50% of the transfer value of their pension for taking illegal payments from the fund.
Tax rules say retirement savers under 55 cannot take cash from their pensions unless exceptional circumstances apply.
Under the new rules HMRC will:
- On notification that a pension scheme is setting up, a risk assessment will take place before permission to take in funds is granted
- Pension fund administrators asking for confirmation they can transfer funds to another scheme will only be given when the scheme is registered and intelligence held by HMRC does not indicate the receiving fund is suspected of involvement in pension liberation scams
HMRC is also committed to keep the pressure on pension liberation scammers by helping a multi-agency task force of police and regulators identify suspected bogus pension firms.
Pension firms back changes
So far, pension liberation firms are estimated to have picked up £500 million in fund transfers.
Steve Gay, of the pension industry trade organisation the Association of British Insurers, said: “This is an important step in the fight against pension liberation. The ABI has urged HMRC to make the rules for setting up a pension scheme stricter.
“Pension firms are helping HMRC and the task force by sharing information about suspected pension liberation scams.
“We will do everything we can to stop this fraud.”
