Pension Liberation Dilemma For Ombudsman

Pension liberation complaints are making life difficult for a consumer watchdogs handling complaints about suspected scams.

The Pensions Ombudsman (TPO) is in the middle of the row and has prevaricated for months about making decisions on a pile of complaints from retirement savers that their instructions to transfer their funds to pension liberation companies are being stalled by providers.

The TPO is deliberating on 84 complaints and has put off announcing adjudications several times already this year.

Pension liberation involves accessing retirement funds before the age of 55 years old.

Technically, the only official way of doing this is if the retirement saver can show that they are terminally ill or suffering from a severe medical condition.

Pension unlocking is not illegal

However, retirement savers can take money from their pension as an ‘unauthorised payment’ providing they pay a tax charge of 40% plus a surcharge of 15%.

The unauthorised payment rule does not make pension liberation illegal, but many advisers fail to tell the saver unlocking their pension early about the tax charge.

Because pension liberation is not illegal, the pensions industry is concerned the TPO will come down in favour of the consumer for most of the complaints already lodged – and that this decision could open the way for hundreds more complaints.

Meanwhile, HM Revenue & Customs (HMRC), pension providers and The Pension Regulator are running a campaign to raise awareness about scam pension liberation firms.

Pressure from campaigners

One of the industry campaign co-ordinators, Margaret Snowdon argues the TPO will be flooded with work if the ruling supports consumers transferring their cash to pension liberation firms.

“If everyone thinks the ombudsman will support them if they want to unlock their pensions, then everyone who has had a move blocked will want to make a complaint so they can get at their money,” she said.

“It’s only natural news will get around and the ombudsman’s work load will become untenable.”

However, Ms Snowdon’s remarks can be interpreted as putting pressure on the TPO to rule against consumers.

Lawyers say the TPO could easily outsource investigating pension liberation claims to private firms.

One lawyer, Nick Stones of Pinsent Masons, said: “Outsourcing should not be an issue. If a large number of complaints on the same legal issues need looking at, then lawyers can deal with this in a cost-effective way.”

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