Pension experts at the forefront of tackling pension liberation scams have put together a list of tips for spotting a dud scheme run by fraudsters.
Although pension and tax officials from regulators and HM Revenue & Customs have worked behind-the-scenes to close the legal loopholes exploited by bogus pension schemes, consumers have been left in the dark about identifying fraudsters after their cash.
Now, an expert working with The Pension Regulator has come up with a checklist highlighting the signs of fraud.
Questions to ask
Questions consumers should ask pension advisers who want to transfer their pensions include:
- How long has the pension fund been established as many pension liberation scams are newly established businesses
- Is the scheme registered with HMRC – pensions must have a registration number that can be checked
- Is an adviser offering a pension loan or other cash benefits to carry out a quick transfer?
- Did the adviser get in touch by text, email or cold calling on the phone?
- Is the firm taking the incoming transfer chasing the money with regular calls and emails?
- Is the receiving scheme run by an employer that the consumer does not work for?
“One key reason pointing at pension liberation is the reason why the retirement saver is making the transfer,” said Dalriada Trustees project manager Sean Browes.
“If they do not work for the employer running the scheme or are expecting some cash, then something is likely to be wrong.”
Unregulated advisers
A recent High Court case that determined many pension liberation vehicles set up as employer schemes to exploit a registration loophole that makes them seem bona fide to consumers.
To try and lock new pension liberation schemes out of the market, HMRC has set up a new registration procedure, but the concern is that will push pension liberation into the hands of unregulated advisers.
Pension liberation is the term for firms that offer to give early access to pension funds. Pension rules ban anyone under 55 from taking payments except under specific exceptional circumstances.
The tax penalties of pension liberation can be severe, starting at 55% of the value of the transferred fund and ranging as high as 70%.
Many pension liberation advisers set their fees at up to 30% of the transfer value.
Regulators and police have raided a number of schemes this year, closing down a call centre in London while seizing documents and data that pointed at a small group of advisers suspected of most of the alleged pension liberation fraud in Britain.
