Pension minster Steve Webb has waded into the pension liberation row engulfing the industry by claiming scammers may be masquerading as approved retirement schemes.
His comments come in a letter to Financial Secretary to the Treasury David Gauke asking him to ask HM Revenue & Customs (HMRC) to investigate whether some pension liberation firms may have escaped detection when screening rules changed.
Before September 2014, HMRC accepted applications from firms setting up as approved pension schemes on face value and had a loose regime for checking if the providers offered genuine retirement schemes.
This changed in September 2014 as part of a crackdown on pension liberation firms.
Since then, HMRC has carried out compliance check on any new provider to weed out scammers.
Under the radar
However, the minister wants a guarantee that no fraudsters slipped through the net and are operating under the radar of regulators.
According to HMRC, the number of applications to set up new pension schemes plunged by 40% when the new rules were implemented.
Webb’s action follows the first rulings from the The Pensions Ombudsman on complaints from retirement savers blocked from switching their funds to suspected pension liberation schemes.
The ombudsman backed the host providers decisions not to allow the transfers, but ordered that they should have to prove the requesting schemes were scammers to hold on to the cash.
The minister wants to ensure no rogue schemes are listed as approved pensions so retirement savers cannot transfer their funds to a liberation scheme.
“I’m worried that the number of applications to become pension schemes dropped so much that there might be a lot more in the system who are not suitable,” said Webb.
“Pension savers would obviously believe just because a pension scheme was in the system that the organisers are not scammers and I want reassurance that we have done as much as we can to root these schemes out.
Pension liberation is generally when someone aged under 55 years old transfers their pension to a firm who allows them to draw on their funds.
This is not illegal, providing the retirement saver pays tax at 55% on the transfer value of the fund. However, many savers have reported their funds have gone missing or they have been charged fees of up to 35% of their savings for the pension liberation service.
The latest figures from the government estimate pension funds of around £500 million have gone to scam firms.