Christine Brightwell, director of regulatory governance and risk at B&CE, on how to spot the ‘evil' pension liberators...
Pension liberation has become a hotly-debated topic. A common view is that only the self-employed with pots of £40,000 or £50,000 are targets, with these ‘liberators’ having no interest in the small stakeholder pots.
That may have been the case in the past, but not now. What we are talking about is fraudulent pensions liberation.
Of course, an individual can legally access their pension pot before retirement, but they do have to pay tax - and rather a lot of it.
Help your clients spot a pension liberation scheme
But that is not what is being offered by the fraudsters. The ‘traditional’ liberation – whereby the ‘adviser’ pockets 40% or 50% commission, while the member discovers they owe more to the HMRC than they have received – is not the only scam in town.
Auto-enrolment = more targets
With automatic enrolment, we now have hundreds of thousands of individuals swept into pension saving. This is a good thing in general, but it also means that there will be even more financially naive scheme members to be preyed upon. And make no mistake, they will be.
People are short of money: with redundancies, pay cuts and payday loans, the possibility of getting their hands on even a modest sum is hard to resist.
We know people are often no good at the self-discipline of saving for the future. We could cite many explanations: “It’s so small, it won’t give much of a pension anyway”; “It’s my money”; “I need the money now”.
So, what can be done to help make scheme members savvier, protecting existing pots and the much needed ‘new’ pension savings?
I suggest a much more ‘eyes open’ and straightforward approach from the legitimate providers, trustees and scheme administrators.
Spotting the looky-likey schemes
Now, in the true style of the designer label rip-offs, we have a proliferation of looky-likey pension schemes and advisers.
The ‘adviser’ could actually be registered with the regulator, probably an historical registration as an IFA.
Rather sweetly, they could also be registered with the Information Commissioner as a data controller, just to make their customers feel a bit more comfortable.
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