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Govt urged to make unauthorised pension payments illegal


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.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Its a good idea but it has no chance of working in practice.

    There are far too many of these schemes out there are the moment and HMRC and TPR are painfully slow at closing them down.

    What scheme Administrators need is a list of potential scam schemes as the information we are getting at the moment is piecemeal and for the regulators to get their finger out and deal with the issue!

  2. These schemes are currently “legal” therefore to make them “illegal” will require a change in the law will it not?

    What would be the penalty for accessing your own money after you’ve paid the tax charge?

    Could this be the pension providers getting worried as they can see their funds under management exiting the door.

    I think a little more debate should be considered to make pensions more attractive and flexible.

  3. …..whilst losing business may be something insurers are indeed worried about, I’d suggest the biggest concern I’d have is clients who don’t realise that the ‘carrot’ they’re being offered will result is a massive stick following soon after which will wipe out a large proportion of their pension.

    From my expereince, the liberation ‘schemes’ are typically being offered by unregulated firms and I have no doubt that they will not make the client aware of this, nor the implications of such unlocking. I’ve also seen them being linked to the sale of UCIS which can again introduce dangers which many clients won’t comprehend.

    I would also suggest that pensions are more flexible now than ever before BUT let’s not lose sight of the fact that they are there to serve a specific purpose – to defer current income until after someone is 55 or older. If someone doesn’t want to do that, don’t use a pension – there are plenty of other solutions out there.

    I’m very concerned about the level of unregulated firms canvassing for regulated business as, in my experience, one of the last things a client asks when there’re being over promised is ‘are you regulated’.

    It’s easy to blame the regulator but IMHO the regulator isn’t the one to blame……..

  4. Nick White, Pensions Law Limited 28th February 2013 at 10:34 pm

    …. if anyone from tPR is reading this, please could they do something about the basic error in their latest materials ?

    The document at

    “Only in very rare circumstances can members access personal or company pensions before age 55. Any company that claims to be able to do this is likely to be engaged in pension liberation activity.”

    This is nonsense: memebers only need to meet the ordinary “ill health condition”.

    The point is not academic: I have personally helped in cases where reputable pensions administrators were trying to prevent members falling into the clutches of pensions liberators, and in some of those cases it turned out that the member, although below 55, met the ill health condition and could legitimately draw benefits anyway.

    If tPR’s materials (and its understanding of the tax legislation ?!) make members in ordinary ill health believe that they can’t draw benefits before 55, the effect will actually be to push some of them into the hands of these vultures circling the industry.

    These members are often desperate and vulnerable people: the least they deserve is that our regulators get the basic facts right.

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