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Pensions and retirement planning


HMRC tightens pension scheme registration rules

Neil Dickey

HM Revenue & Customs (HMRC) has announced that it has tightened its pension scheme registration rules with effect from 21 October 2013 in order to help in the fight against pension liberation fraud.

Pension liberation schemes offer pension members early access to their pension – which can normally only be taken at age 55 – but which often fail to warn the member that doing so will leave them with a large tax bill and the prospect of losing most of their pension fund.

In a move away from a ‘process now, check later’ approach, pension scheme registration with HMRC, which carries important benefits in terms of tax relief on contributions and investments, would no longer be automatically confirmed.

From 21 October, once the online form is successfully submitted, at this point the scheme is no longer automatically registered, and any contributions received won’t qualify for tax relief, while any transfers received from another registered pension scheme will be an unauthorised payment. HMRC will then review the application and may need to request additional information before deciding if the scheme can then be registered, so giving HMRC the chance to identify any potential new liberation schemes.

The government has been working with various bodies to stamp out pension liberation fraud and continues to investigate new reports of this abuse. On 23 October, the Pensions Minister, Steve Webb, noted that The Pensions Regulator (TPR) is currently looking into 27 live cases of pension liberation fraud which it believes are processing around £185 million worth of scheme money.

Cumulatively, estimates are that around £420 million of scheme monies have already been affected by pension liberation fraud overall. The tightening up of the registration rules by HMRC is part of the overall strategy gradually being put in place to try to prevent further monies being added to this already substantial fraud.


OFT consults on workplace pensions

Ian Naismith

Following the Office of Fair Trading (OFT) report into workplace pensions, the Government has issued a consultation on charges. It is concerned that automatically enrolled employees in smaller companies could get a poor deal.

Clearer explanation of charges is proposed. Existing industry initiatives include a code on disclosing charges to employers, supported by a comparison tool, an insurance companies commitment to disclosing charges in pounds and pence yearly, and work to improve disclosure of investment transaction charges. The consultation asks whether the Government should take action to standardise disclosure, largely extending the initiatives of major players to the whole market.

The Government proposes a charge cap for automatic enrolment default funds. The options are a cap on the annual management charge of 0.75% or 1% a year, or a 0.75% cap which could rise to 1% if a satisfactory explanation is given to the Pensions Regulator. The cap would apply from April 2014, with a transition until April 2015 for employer staging up to March 2014. There would be similar restrictions for schemes, including NEST, with different charging structures.   

The Government may ban active member discounts, where the annual management charge increases for those who stop contributing, and extend the ban on consultancy charges and commission to schemes set up before they were outlawed. It asks for evidence on the effect of these measures. Some say the proposals do not go far enough, and others that a cap could increase charges by setting a new benchmark. Further heated debate is certain.  

The Government has also published regulations simplifying automatic enrolment for employers.  These include extend the joining and information window from a month to six weeks and allowing alternative definitions of pay reference periods to be used. These changes demonstrate a willingness to learn from the experience of early staging employers. 



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