Transfers to SSAS pensions should be banned and the government should look at the rules that make them the favourite choice of scammers, urges a leading consumer watchdog.
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The Pension Regulator (TPR) Andrew Warwick-Thompson has laid out how he wants the rules changed to stop pension liberation fraud in a no-holds-bar blog outlining his submission to the government’s pension scam consultation.
He blames SSAS pensions for allowing loopholes for scammers to exploit.
SSAS are small self-administered schemes often setup by employers.
The TPR says only SSAS pension with more than two members must register with the regulator and 21,000 have signed up but at least another 750,000 one-man schemes may be operating below the regulatory radar.
SIPPs are safer for savers
“Why is this a problem? SSAS are exempt from many of the legal duties designed to protect members that are applicable to larger schemes,” said Thompson.
“The ease with which a SSAS can be established, and the minimal legal and reporting requirements for such schemes, has made them the vehicle of choice for criminals setting up a scam.
“In my view, SSAS have gone far beyond the scope of the policy intent that created them. Self-invested personal pensions (SIPP), which are the subject of far tougher regulation by the FCA, are a safer vehicle for consumers who want control over the investment of their pension pot.
“I believe that pension transfers to SSAS arrangements ought to be banned. In fact, to put a stop to their abuse, I believe that an outright ban on the establishment of any more SSAS arrangements also warrants serious consideration.”
Plan to combat fraudsters
Scammers typically set up sham workplace pensions in a SSAS and switch retirement savings for the under 55s into their scheme.
His hard-hitting expose of how scammers can open a back door to pension fraud is the first time a regulator has revealed such deep frustration with the law.
The government consultation is putting forward a ban on cold calling retirement savers as one measure to combat pension fraudsters.
Many pension professionals want a ban on any form of electronic contact – including email and texts.
Another regulator, the Financial Conduct Authority has recently issued guidance demanding advisers check pension transfers more thoroughly to ensure they offer suitable investment protections to clients.
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