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As a result of the consultation on pension scams the government has now introduced new proposals for the Finance Bill 2017-2018, potentially the third bill of the year. It is anticipated these may come into force by April 2018.
The government is discussing a range of measures which aim to tackle three areas of pension scams:
A recent parliamentary petition which revived widespread media coverage regarding the call for a ban on cold calling, highlights the message is becoming clear for individuals to be mindful to give cold callers the cold shoulder. The key objective of the cold calling ban is to simplify to the general public the anti-fraud message.
From our experience of dealing with various pension transfers, it has become more apparent from late that providers are taking on additional checks and obtaining supplementary information from the pension scheme trustees/administrators and members prior to allowing a transfer to proceed.
By limiting the opportunity to transfer certain occupational pension schemes will hopefully reduce people accessing their pension pot within a fraudulent arrangement. Firms and trustees are able to block pension transfers which they perceive to be fraudulent. However from our experience the additional amount of paperwork and extra information requested from providers has significantly slowed down the transfer process, as this is affecting all pension transfers.
Clients and advisers should be mindful that this extra diligence is affecting turnaround times, and if monies are needed urgently (e.g. payment of benefits or property purchase) we would suggest starting the transfer process early.
Further consultation from the Government will be provided in due course to ensure legitimate transfers are not blocked or delayed.
The industry is aware that SSAS’s have been targeted for pensions scams and as a non-regulated vehicle, have been perceived an easy target for these unscrupulous bodies. They are often opened using off the shelf companies that have no intention of trading. Funds are then liberated from these pensions by all sorts of back door methods.
To prevent this type of scamming from happening the government have suggested that HMRC will not register new schemes where the sponsoring employer has been dormant for a period of at least a month in the previous 12, leading up to the decision. Generally this will be welcomed if it helps to stop these practices. Care will have to be taken if a new SSAS is being set up for a new company or a company that is being restructured.
Perhaps of greater concern is the ability of HMRC to de-register existing schemes where the sponsoring employer has subsequently become dormant. The legislation does not state this is compulsory, just that HMRC will have the powers to do this. Many SSAS schemes will be in existence whereby the original employer no longer trades. For these bone fide arrangements one would hope that common sense will prevail and they will not be forced down the route of having to transfer to some form of SIPP arrangement, potentially at great cost to the members. Interestingly no comment is made for existing schemes that have no sponsoring employer.
If this legislation does create some unexpected behaviour from HMRC, it is expected that there will be plenty of appeals and response from the industry. However, in the meantime, clients should be made aware, that there are likely to be delays in establishing new SSAS schemes and not to leave their planning to the last minute, as this could impact on their retirement!
To ensure individuals do not fall foul to pension scams the national Scams Awareness Month is May.
If you are considering reviewing your pension planning we would suggest that you speak with your usual financial adviser or alternatively, speak to Kerry Houghton for more information on 01772 550614 or via email Kerry.firstname.lastname@example.org