Sarah Bonamy Pension Liberation
Pension Liberation 5 December 2013 Sarah Bonamy
Pension liberation: What is it and why am I talking about it? • • • •
Pension savings released before age 55 Adverse tax consequences Fraud? Big problem – estimated £3bn liberated in the next 3 to 5 years • City of London Police: “…the new boiler room fraud phenomenon as fraudsters seek to exploit new opportunities thrown up by the changing economic climate.” • Long term impact for individual and society as a whole
How does pension liberation happen? • Unsolicited text messages, cold calls • Often preys on people that need cash quickly and cannot access mainstream debt market • Potential members told not to tell anyone about transfer • Often pressure to transfer quickly
Approach taken by appointed trustee • • • • • • • •
Request to exercise a Regulatory Function Powers granted to trustee Control of scheme accounts/assets Investigations into investments Obtaining information and documentation Containment of problem Membership database/communication Legal action to secure assets
Warning signs • Receiving scheme not registered, or only newly registered, with HMRC • Receiving scheme sponsored by new or dormant employer • Trustees do not have the requisite skill and knowledge • Member attempting to access pension before age 55 • See tPR Scorpion Action Pack for more details
Recent High Court decision: Dalriada v Nidd Vale & others/Pi Consulting v tPR & others [2013] EWHC 3181 (Ch) • Question over whether the schemes were occupational pension schemes • Validity of tPR appointments? • Key questions asked: (1) must be set up “…for the purpose of providing benefits…” – how do you assess purpose? (2) do you need an employee? • Occupational pension schemes for purposes of s.1 Pension Schemes Act 1993 – (1) Documentation for purpose of providing benefits – (2) Directors were “employed”
Balancing exercise: member’s statutory right to a transfer v risk of pension liberation (1) Not making the transfer: – Complaint to Pensions Ombudsman? – tPR action – unlikely if followed guidance – Member claim pension would have performed better? (2) Making the transfer: – Not a “recognised transfer”? (less likely now) – No discharge? - s.99(1) Pension Schemes Act 1993 – Scheme sanction charge?
What should advisers do? • Warn members, and ensure they read tPR’s Scorpion Pack • Be alert to the risk • Processes and controls/due diligence • Declarations from receiving scheme/member • Report concerns to Action Fraud, tPR and HMRC • Do not disclose reports to the member – you may inadvertently commit an offence under the money laundering regime • Refrain from saying anything about the receiving scheme that may be defamatory
Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority, and by the appropriate regulatory body in the other jurisdictions in w hich it operates. The w ord ‘partner’, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm of equivalent standing. A list of the members of the LLP, and of those non-members w ho are designated as partners, is displayed at the LLP’s registered office: 30 Crow n Place, London EC2A 4ES, United Kingdom. We use ‘Pinsent Masons’ to refer to Pinsent Masons LLP and affiliated entities that practise under the name ‘Pinsent Masons’ or a name that incorporates those w ords. Reference to ‘Pinsent Masons’ is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. © Pinsent Masons LLP 2013 For a full list of our locations around the globe please visit our w ebsites:
www.pinsentmasons.com
www. Out-Law.com
Pension liberation: What is it and why am I talking about it? • • • •
Pension savings released before age 55 Adverse tax consequences Fraud? Big problem – estimated £3bn liberated in the next 3 to 5 years • City of London Police: “…the new boiler room fraud phenomenon as fraudsters seek to exploit new opportunities thrown up by the changing economic climate.” • Long term impact for individual and society as a whole
How does pension liberation happen? • Unsolicited text messages, cold calls • Often preys on people that need cash quickly and cannot access mainstream debt market • Potential members told not to tell anyone about transfer • Often pressure to transfer quickly
Approach taken by appointed trustee • • • • • • • •
Request to exercise a Regulatory Function Powers granted to trustee Control of scheme accounts/assets Investigations into investments Obtaining information and documentation Containment of problem Membership database/communication Legal action to secure assets
Warning signs • Receiving scheme not registered, or only newly registered, with HMRC • Receiving scheme sponsored by new or dormant employer • Trustees do not have the requisite skill and knowledge • Member attempting to access pension before age 55 • See tPR Scorpion Action Pack for more details
Recent High Court decision: Dalriada v Nidd Vale & others/Pi Consulting v tPR & others [2013] EWHC 3181 (Ch) • Question over whether the schemes were occupational pension schemes • Validity of tPR appointments? • Key questions asked: (1) must be set up “…for the purpose of providing benefits…” – how do you assess purpose? (2) do you need an employee? • Occupational pension schemes for purposes of s.1 Pension Schemes Act 1993 – (1) Documentation for purpose of providing benefits – (2) Directors were “employed”
Balancing exercise: member’s statutory right to a transfer v risk of pension liberation (1) Not making the transfer: – Complaint to Pensions Ombudsman? – tPR action – unlikely if followed guidance – Member claim pension would have performed better? (2) Making the transfer: – Not a “recognised transfer”? (less likely now) – No discharge? - s.99(1) Pension Schemes Act 1993 – Scheme sanction charge?
What should advisers do? • Warn members, and ensure they read tPR’s Scorpion Pack • Be alert to the risk • Processes and controls/due diligence • Declarations from receiving scheme/member • Report concerns to Action Fraud, tPR and HMRC • Do not disclose reports to the member – you may inadvertently commit an offence under the money laundering regime • Refrain from saying anything about the receiving scheme that may be defamatory
Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority, and by the appropriate regulatory body in the other jurisdictions in w hich it operates. The w ord ‘partner’, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm of equivalent standing. A list of the members of the LLP, and of those non-members w ho are designated as partners, is displayed at the LLP’s registered office: 30 Crow n Place, London EC2A 4ES, United Kingdom. We use ‘Pinsent Masons’ to refer to Pinsent Masons LLP and affiliated entities that practise under the name ‘Pinsent Masons’ or a name that incorporates those w ords. Reference to ‘Pinsent Masons’ is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. © Pinsent Masons LLP 2013 For a full list of our locations around the globe please visit our w ebsites:
www.pinsentmasons.com
www. Out-Law.com
