The Government is facing calls to make intentional unauthorised pension payments illegal as concerns about “liberation” schemes continue to grow.
The Pensions Regulator has launched a wide-ranging communications campaign designed to alert savers and the industry to the dangers of pension liberation schemes.
Accessing your pension before age 55 is not illegal, although people who do this will be hit with a 55 per cent unauthorised payment charge from HMRC.
Aviva corporate benefits head of policy John Lawson says: “Some of these pension liberation schemes are just making unauthorised payments to members, which are technically allowed under the law although the member will be subject to huge charges from HMRC.
“The Government should review the unauthorised payment legislation. For example, it could make intentional unauthorised payments illegal.
“The unauthorised payment rules have been in place since 2006 but the payments to these liberation schemes are growing all the time and we need the Government to take some decisive action.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Making unauthorised payments illegal would help discourage pension liberation.
“I would also like to see the Government and the regulators make sure the punishments for running these schemes are severe enough to stop people setting them up in the first place.”
A HMRC spokesman says any changes to legislation would need to be made by the Treasury and the DWP.
He says: “When any pension scheme is registered with us, we make clear that the conditions to be a registered pension scheme must continue to be met and that compliance checks are carried out.
“Our compliance teams have directly intervened to tackle schemes directly involved in liberation and acted to stop other schemes being misused by third parties.”