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FCA: Pension liberation fraud seen as most common financial crime

Firms believe the crime consumers are most at risk of is pension liberation fraud, according to the FCA’s first annual financial crime survey published today.

The study of over 2,000 UK firms in 2017 gives a collective view of the activity being undertaken by firms to combat financial crime across the industry for the first time.

The watchdog says the data represents an important step as historically, it has been difficult for agencies to acquire robust figures on financial crime.

The fraud types for which customers were most often identified as the victim were pension liberation fraud where people are misled into transferring their pension pot early and incur a big tax penalty.

Account takeover and debit card fraud were viewed as the next greatest threats to consumers.

Meanwhile, industry was felt to be more often the victim of expenses fraud, loan repayment fraud, and mortgage fraud.

The watchdog’s survey indicate the industry collectively employ 11,500 full-time equivalent staff in financial crime roles.

It also estimates the financial services industry is spending over £650m annually in dedicated staff time to combat fraud, laundering and other financial crimes.

The government has been working to combat fraud and included introducers in revised proposals to cold call legislation announced in the last Budget.

The move means that IFAs will now be affected if they use any company that finds new clients through cold-calling – even if they provide these clients with high-quality advice afterwards – and they will be banned from working with such firms.

Citizens Advice figures from 2013 claim 97 per cent of pension fraud cases stemmed from cold-calling and figures produced by the FCA over the summer said each victim of pension fraud lost £91,000 on average in 2017.



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Pension fraud may well be up given freedoms but surely pension LIBERATION – i.e. pension busting – is surely likely to be down as anyone over 55 can effectively do that in any case?

    Genuinely surprised that this is an increasing risk (all the cases I came across pre-dated freedoms) and therefore my (albeit anecdotally based) view is that liberation fraud is reduced.

    Either way, it’s all iffy and it very much feels that the public have been targeted for waaaaay too long and yet it still continues.

    Rules will be adhered to by those who follow them. For the rest, the likely root cause needs addressing.

    • My understanding of pension liberation (busting) is that it entails enabling people to cash out their pension funds before the age of 55, on the promise that there’ll be no tax charge. The reality, of course, is that withdrawals before age 55 are subject to a 55% unauthorised payment tax charge.

      That aside, all providers are (supposedly) responsible for undertaking due diligence on the scheme to which a transfer of funds has been requested and, if it’s not an(other) HMRC registered one, refusing the request, as several already do. So why are others still not following this rule? Does the FCA not have in place a reporting process so it may know which providers are failing in their due diligence obligations, and then going after them? It seems so obvious and so straightforward that, as ever, one has to wonder why the FCA doesn’t just GTF on and do it.

  2. UK Regulated Advisers in the main follow the rules (there is and always will be that very small element that don’t in any industry) and it is estimated we count for currently 2% of the problem concerning pensions.

    Unregulated funds via SIPP’s account for a massive percentage of the frauds, yet are allowed to continue, year after year. At what point does someone in power take control and take the obvious action?

    I need to question based on the advantages to very few, why these unregulated investments are still allowed to be held and sold via UK Pensions.

    Surely the simple solution would be to remove unregulated Investments from the UK Pension market.

    There should be two exceptions. Regulated DFM’s who are on a regulators approved list and UK Commercial Property Purchases by scheme members of SIPP’s/SSAS.This would allow higher net worth consumers and business owners to continue to benefits from these valuable investments, which are UK based and heavily monitored.

    Why does the Government who partly funds the Pensions (tax advantages and reliefs) wish to allow overseas unregulated investments within any UK Pension? This does not make any sense!

  3. Indeed the FCA are correct Pension Liberation is FRAUD and not ‘Sippable’. Sipp Operators (SO) who facilitate such schemes are complicit, whilst there is mitigation if the SO have been misled into approving these schemes, fraud by misrepresentation, however SO still have regulated duties which WOULD identify such schemes from the outset. Blindly facilitating these schemes is not only negligent but also criminal which is why I guess the SO do not report them to the Regulator and authorities as required.

    • Pension liberation is, of itself, not fraud. There is usually tax fraud associated with it because people don’t want to (or, more often, don’t realise they have to) declare the event to HMRC and account for the brutal penalties for accessing the money early.

  4. “it is estimated we count for currently 2% of the problem concerning pensions”

    Firstly, by who? Secondly, are you seriously suggesting that only 1 in 50 cases of pension “problems” involved a regulated adviser?

  5. “surely pension LIBERATION – i.e. pension busting – is surely likely to be down as anyone over 55 can effectively do that in any case?” – a somewhat worrying lack of understanding on pension liberation.

    regardless of whether fraud or tax fraud, SO’s are required to protect against this – difficult as that can be. SIPP Members are also complicit in agreeing to such approaches.

    • I don’t understand why it should be difficult for any SIPP operator to prevent members under the age of 55 from cashing out their fund. Given that those who facilitate it are breaking the law, one wonders on what basis they do it. Surely the powers that be, upon discovering any such breaches, will go after them? By the same token, said authorities should also go after any provider that releases funds to any scheme that isn’t appropriately registered with HMRC and has an appropriate approval reference (used to be the SFO, though I don’t know what it is these days). And yet, somehow, it still seems to be happening.

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