QROPS Providers Sign Up To Fight Pension Liberation

Lisa Smith, BA (Hons), CeFA

Qualifying Recognised Overseas Pension Scheme (QROPS) providers are joining forces with pension liberation campaigners in a bid to stop scammers.

They are working with Project Bloom, a government task force tackling pension liberation scammers.

Besides pension trustees, the task force also includes big hitters such as The Pensions Regulator (TPR), the Financial Conduct Authority (FCA), the Department for Work and Pensions, HM Revenue & Customs (HMRC), the Serious and Organised Crime Agency, Serious Fraud Office, National Fraud Authority, City of London Police and the Information Commissioner’s Office.

According to pensions minister Steve Webb, the task force is investigating 27 pension liberation frauds involving £185 million of retirement savings.

Margaret Snowdon leads the Pension Liberation Industry Group which co-ordinates action by providers dealing with suspicious transfer requests.

Pension code

Pension liberation is when a financial adviser helps a retirement saver access their retirement savings before the age of 55.

She explained although pension liberation is not illegal, many of the schemes involve fraud, but instead of punishing the fraudsters, fines and penalties are charged to pension providers switching money to a liberation scheme and the saver.

“We want to try and hit the liberators rather than the victims,” said Snowdon. “Watch this space for some news around December.

“We are working on a code of standards for all pension schemes that will include detailed due diligence aimed at identifying suspected pension liberation.”

The code will include personal pensions, self-invested personal pensions (SiPPs), QROPS, small self-administered schemes (SASS) and workplace pensions.

The pensions minister revealed earlier in the year that almost £500 million of pensions were falling under the control of pension liberation companies each year.

Risky investments

The big pension providers regularly release figures about suspected bogus pension schemes – Standard Life has put 374 transfer requests worth £13 million on ice this year. The Phoenix Group has refused almost 1,000 transfer requests worth £21 million and Friends Life has resisted more than 1,000, amounting to around £30 million.

In principle, pension liberation – sometimes called pension unlocking or pension release – is not illegal providing the retirement saver reclaiming their cash pays any tax due.

HMRC will demand at least 55% of any early cash drawdown from a pension as an ‘unauthorised withdrawal penalty’.

However, in many cases pension liberation firms do not disclose this to retirement savers.

One key sign of a pension liberation firm is a promise to reinvest pension cash in low-risk offshore deals like hotels offering 15% or more returns.

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