Action against pension liberation scams is in a mess as regulators and the government have failed to tackle the problem head-on.
The row about whether pension liberation is a fraud or scam has rumbled on for years and no one in an official post has come up with an answer.
At one time or another, The Pensions Regulator, HM Revenue & Customs (HMRC) and the Pension Ombudsman have all looked at tackling the problem.
The basic issue is that when lawyers and politicians sat down to draft pension rules, they did not foresee that some financial advisors would look at ways to bypass them.
The basic rule is no one can access their pension savings until they are 55 years old unless they have some reasonable reason to do so.
Law is clear
This is read as suffering a terminal illness or disability that means the retirement saver’s life is shortened and they should have their cash sooner rather than later to make their life more comfortable.
The law is clear – retirement savers can access their cash early without special circumstances, providing they pay the 55% tax charge on the money.
Some financial advisors and pension firms have gone before the courts and regulators and individual schemes have been declared fraudsters, but none of these cases changed the law to make all early access for the under 55s illegal.
Now, the ombudsman has muddied the waters even more by determining retirement savers have the right to transfer their money out of a pension.
These cases have not clarified the rules at all because HMRC asked pension providers to hold up pension transfers to suspected scammers, but the ombudsman is saying they have no right to do so.
Look after your own money
The only clear way for retirement savers to proceed seems to be to take on the responsibility of investigating where their pension funds are going before requesting a transfer.
HMRC will fine any that make an unauthorised withdrawal through a pension liberation scheme, but providers cannot stop the transfers.
The rule seems to be that if you are ready to pay the tax, you can transfer your pension where you like.
The new flexible access rules for those aged 55 and over are not affected by the confusion, but retirement savers still have to beware of where their cash goes if they withdraw from their pension and hand cash over to a high return investment that seems too good to be true.