UK tax authorities to crackdown on pension fund registration

Published:  22 Oct at 6 PM
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Pension liberation scammers are facing another onslaught in the campaign to stamp out their activities.

Beginning this week, HM Revenue and Customs will crack down on pension fund registration in an attempt to deter fraudsters from marketing illegal pension liberation schemes. The action is in response to the high number of fraudulent self-certificated pension funds set up by unscrupulous financial advisors to rob unwary retirement savers.

Until now, self-certification of pension schemes by financial advisors has been the norm, operating on a 'process now –check later' basis. The loophole has allowed fraudulent FAs to part savers from their money by offering a chance to liberate cash from their pensions before the payment period begins.

Scammers set up a self-certificated, registered scheme with HMRC, making everything seem above board when the pension provider checks before making a transfer. Once the transfer is made, the FA takes 15 per cent of the full amount and the remainder either disappears offshore or is invested in worthless bonds.

Worse still, if the retirement saver is under 55 years of age, he faces a fine of 50 per cent of the transfer, as taking out money from a pension plan before 55 is against tax law. To counter the scams, the Revenue department is to perform a risk assessment before registration is allowed and funds can be taken in.

Furthermore, pension fund admin staff-requested confirmation on fund transfers will only be given once HRMC is convinced the registered scheme does not involve a pension liberation scam. HRMC is also working with regulators and the police on a multi-agency task force charged with identifying scammers running bogus pension companies.

Due diligence is equally important in expat destinations, as pension fund scammers posing as qualified, licensed FAs are operating across Europe and Asia. Those approaching retirement outside the EU should be especially careful, as they have no legal redress if things go wrong.
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