Regulators launch pension liberation crackdown

Regulators have joined forces to raise awareness of pension liberation “predators” who target cash-strapped workers promising to release their pension as a loan or lump sum.

The campaign, aimed at consumers and pensions professionals, is part of a multi-agency crackdown on the schemes which have already released hundreds of millions of pounds and seen thousands of members lose some or all of their savings.

The Pensions Regulator has teamed up with the Financial Services Authority, HM Revenue & Customs and the Serious Fraud Office, as well as several other organisations.

They have published information, carrying scorpion imagery, which illustrates the threat to people's pensions if they take up the offers.

The campaign includes:

• A warning insert that administrators and pension providers will be asked to include in the information they provide to members who request a transfer of their pension.

• A more detailed information leaflet for members looking to understand the consequences of these offers, which will be available on TPAS' website.

• An action pack for pension professionals, including a checklist and examples of what to look out for.

TPR warned where administrators receive a transfer request and detect the warning signs of liberation - such as pension money being passed back to the member before age 55 - they should consider whether to make the transfer, and report their concerns to Action Fraud.

Trustees and scheme managers must also be able to demonstrate that they have taken steps to establish the legitimacy of an arrangement if they delay a member's transfer request.

TPR chief executive Bill Galvin said the pensions industry needs to do what it can to protect members.

He said: "There can be a huge sting in the tail for those that are tempted by the sales patter. Before considering any transfer requests, we want trustees, providers and administrators to consider whether members' savings are being transferred into a liberation scheme.

"Providers who don't carry out due diligence before processing a transfer may be placing members at high risk - and also exposing themselves to significant reputational damage."

Pensions minister Steve Webb added: "The government is investigating a number of schemes where firms appear to be preying on people when times are tight, and I am working closely with The Pensions Regulator to ensure rules are not being broken."

The ‘pension liberation' schemes entice members to transfer their pension through spam text messages, cold calls or website promotions with the promise of being able to release a portion of cash before the age of 55.

Members can be misled or not properly informed that tax charges and fees can erode their pension by more than half, leaving them with little to live on in retirement.

Their funds are often invested in "highly dubious" risky, unregulated investment structures often based overseas.

The regulator said warning signs for trustees or administrators include receiving schemes not registered, or only newly registered, with HMRC; a member is attempting to access their pension before age 55; the member has pressured trustees/administrators to carry out the transfer quickly; the member was approached unsolicited; the member is informed that there is a legal loophole; or the receiving scheme was previously unknown but now involved in more than one transfer request.

The National Fraud Intelligence Bureau, the Serious Organised Crime Agency, Action Fraud and The Pensions Advisory Service are also involved.