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Regulators launch crackdown on early access ‘pension predators’

Steve Webb 480 LibDems DWP

A coalition of regulators and Government bodies are launching a crackdown on pension “predators” who claim to offer people access to their retirement fund before age 55.

According to research by The Pensions Regulator, the amount of money accessed early from pension pots increased from £25m at the start of 2010 to £200m at the end of 2011.

TPR has worked with the FSA, HMRC, the Serious Fraud Office, The Pension Advisory Service and ‘Action Fraud’ to develop a series of new documents designed to warn people of the dangers of ‘pension liberation’.

These include:

  • a two-page warning notice which providers and administrators will be asked to include in information packs provided to members who request a transfer;

  • a more detailed leaflet for members who want to understand the consequences of pension liberation, which will be hosted by The Pensions Advisory Service website;

  • an action pack for pension professionals, including examples of what to look out for and example scenarios.

Pensions minister Steve Webb says: “Money in a pension is there for retirement and should not be released before at least the age of 55.

“The Government is investigating a number of schemes where firms appear to be preying on people when times are tight, and I am working closely with The Pensions Regulator to ensure rules are not being broken.”

FSA head of financial crime Sharon Campbell says people who try to access their fund early risk losing their entire pension pot through high charges.

She says: “Savers should be very wary of pension release schemes which often carry punitive, hidden rates of commission and where the promised investments may just be scams.

“They could end up losing all of their hard-earned pension.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. So, is this a line in the sand that will attempt to prevent this abuse going forward? Or, will HMRC, SFO, FSA and TPR go after all the schemes and pension scheme members who have been involved in this in the past?

  2. This has got to signal they end of offshore cowboys transferring into QROPS without the qualifications, knowledge or information to give the correct advice to any client.

  3. I agree pensions are for the long term however should the Government and Regulators not be looking at the reasons as to why people are approaching these ‘Liberation’ companies.

    Pensions are far too inflexible with very limited investment offerings and poor annuity prospects at retirement. Many of those consumers who started their pension 20 years ago now need twice as much fund to produce the same level of income as anticipated at outset.

    Pensions are no longer attractive as an investment to many consumers and they will remain so until they are brought up to date and made more flexible. Who would lock up their money for 30-40 years not knowing what taxed income you’ll get when you retire? For many consumers the pension is seen as the terd of investments and no matter how much you polish a terd it is still a terd.

    The Government and Regulators could easily get rid of the cowboys by allowing the policyholder access to their funds less the percentage tax relief they received on their contributions.

    At the end of the day they are being denied access to their own money.

    Hard times arrive at everyone doorstep at some point in life. What is the better option, losing your house now but having a more affluent retirement in 15 years time or keeping a roof over your head and living less affluently in retirement?

    Or would the Government and Regulator prefer the consumer to obtain the funds from a payday lender charging 4000% per annum interest?

    Rather than knee jerk reactions from the Government and Regulator it’s about time they sat down and made some common sense decisions to make pensions more attractive.

  4. About time and it begs the question what has the regulator been doing for the last 10 years as many in the industry have flagged this up as a real problem.

    Not only is there needing to be a crackdown on this type of scheme there also needs to be a crackdown on who is authorised to give advice. How many solicitors and accountants are operating illegally in the advice giving industry with ties to this type of scheme.

    Until the regulator starts to take action on who gives advice these types of schemes will always spring up to dupe the often desperate individuals.

    When you look at who is actually recommending this type of product it’s often accountants and solicitors with links to offshore companies with no authorisation.

  5. @ ritchie
    You are just so wrong! If people wish to save long term and want full access, then pay into an ISA.
    Why do you need a fixed sum at outset on the maturity of 30-40 years? Old pensions used to provide a minimum guaranteed payment, however this was so low, no-one even used this as a worthwhile feature. Whilst there are some pensions that this benefit is now worthwhile, only when the investment has been static for all the inbetween years. Good advice and regular reviews mean better pensions, tax relief included. So not a turd, no matter what you say.
    Its not your money, it could have 40% tax relief, plus growth, thats some of MY monet, so an unauthorised payment charge of 55% seems appropriate.
    Yes, the better option is losing your house now if you have been unable to balance income with expenditure, but even better, stop alchohol, fags, sky, take aways, running old BMWs and buying endless pairs of shoes.
    It is the incompetent non planners who are in this mess. The competent run their finances to balance, perhaps save a little for a rainy day as well as insure for the unexpected.The cost of mortgages is so historically low that anyone who is in difficulty now has other issues. Get them to see CAB before pension coyboys.

  6. Once again the regulators are passing the buck.

  7. Why not see what “Ma” says.

    Problem solved.

  8. The FSA should also clamp down on life companies setting up Income DrawDown for policyholders who contact them saying ” I need some money out of my pension plan”.

    I’ve recently encountered two clients with relatively small pension funds in DrawDown, one of them less than £20,000 and, worse still, they can’t now draw any Tax Free Cash. The life companies concerned gave them no warning (advice) that this would be a consequence of entering DrawDown unless they did exercised their TFC option at commencement, even assuming that Income DrawDown was remotely suitable in the first place.

    Independent advice should be the default option for selecting the right at-retirement options.

  9. I agree with Peter Herd.

  10. “For many consumers the pension is seen as the terd of investments and no matter how much you polish a terd it is still a terd.”

    You are Niall Quinn and I claim my five punt.

  11. RegulatorSaurusRex 12th February 2013 at 2:00 pm

    “FSA head of financial crime Sharon Campbell says people who try to access their fund early risk losing their entire pension pot through high charges”

    Since when has taking your benefits in accordance with the law become a financial crime?

    I took all my pensions as soon as the law allowed, I wish I hadn’t put any money away in the plans but back then it seemed like a good idea.

    I might be dead tomorrow but I have had 10 years of pension at annuity rates you will never see again. Oh, and my fund was fatter than it would have been today had I left it alone.

    The gummint and its poodle regulators are as clueless as they come.

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