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Pensions regulator warns providers on blocking ‘liberation’ transfers

TPR executive director of DC Andrew Warwick-Thompson warns against “over-enthusiastic” response to pension liberation concerns.

The Pensions Regulator is planning to step up efforts to combat pension liberation but warns providers and trustees risk breaking Government rules by blocking transfers.

The Government estimates over £420m of pension money has been released early using liberation schemes.  

In February, TPR launched its ‘Scorpion’ campaign in an effort to raise awareness of liberation among members, trustees and advisers.

But in an interview with Money Marketing, TPR executive director for defined contribution Andrew Warwick-Thompson warns against being “overenthusiastic” when blocking transfers.

He says: “Trustees need to adhere to the ‘Scorpion’ campaign, make sure members receive those packs and ask the members to put something in writing after they have read it saying they absolutely do want to transfer.

“I think that is probably as far as a trustee can go at this point because there is an overriding legislative requirement that members are entitled to cash equivalent transfer value.

“We do not want to end up in a situation where perfectly legitimate transfers are being blocked by an over-enthusiastic application of concerns about liberation fraud.”

Aviva blocked 322 transfers to suspected liberation schemes between October 2012 and May this year while Friends Life blocked nearly 500 in the first five months of the year. Phoenix and Legal & General have also raised concerns about liberation attempts they have had to deal with.

Aviva head of policy, pensions and investments John Lawson says: “There are liberation cases where the member is getting nothing from their pension pot because it is all eaten up in fees.

“We need the regulator to take action here and stop this. As a provider, it is a concern that preventing a transfer could come back to bite us. It is an absolutely ridiculous situation.”

Last month, Money Marketing revealed the Pensions Ombudsman is assessing nine fund transfer cases which could have significant implications in the battle against pension liberation – eight of which involve complaints from savers who have been refused a transfer to a suspected liberation scheme. Sources suggest the ombudsman is unlikely to find in favour of the schemes which have stopped transfers.

Informed Choice managing director Martin Bamford says: “Providers are caught between a rock and a hard place on pension liberation. TPR could take action to stop these schemes overnight but there does not seem to be the political will to take action.”

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