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L&G ramps up safeguards against pension 'scoundrels'

by Brian Cantwell on Feb 28, 2013 at 13:28

Legal & General (L&G) has ramped up safeguards in its pension transfer processes to guard against liberation schemes.

L&G's move follows a campaign from The Pensions Regulator (TPR) warning of the dangers of such schemes.

Adrian Boulding, L&G pensions strategy director said: ‘We’re responding to an industry-wide concern that pension liberation is a growing problem, I think we’re acting farther and further and most, but I don’t understand why it takes so long for the regulator, HM Revenue & Customs and the rest to close down these schemes when they only take an afternoon to set up.’

'The regulator should be running these con men and scoundrels off the road.’

A two-tier approach means that if requests are made from a list of known and trusted firms L&G said they will be processed quickly and efficiently.

Boulding said: ‘The vast majority are firms L&G have dealt with for many years and whose employees are on a first name basis with our pensions specialists.’

The second tier involves requests from unknown or flagged firms triggering a series of due diligence tests and strict questioning. Legal guidelines allow up to six months for this due diligence period.

Boulding said: ‘We will be asking for a lot more information and evidence from these people before we release our customers’ money to them.

‘And unless they provide us with 100% satisfaction, we will be reporting any deficiencies we expose back to our customers.’

Liberation schemes usually involve high charges deducted from the cash generated and can lead to a tax charge from HMRC of 55% for an unauthorised payment, leaving little cash from the total amount for the original claimant.

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9 comments so far. Why not have your say?

As anyone heard of the scheme whereby “controlling directors” are being advised to issue redeemable pref's, in their unlisted company, so that they can be bought as an allowable asset by their SIPP?

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John

Thas been a bit of discussion on that subject for some time - from what I have seen mainly on Linkedin.

Many of the wiser SIPP providers wont allow unlisted share purchases where the members are connected to the company so hopefully there arent many of these cases out there.

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Zoomer

Thank you for the info. Do you have a link to where on LinkedIn they have discussed these. I'm looking to dissuade some one from making a very big mistake.

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John

I am afraid I dont have the link - but send them this - its pretty useful:

http://www.pensionsadvisoryservice.org.uk/media/826603/transfer_pack_insert.pdf

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Zoomer

Thank you

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So the 'customer' signs a letter of authority to the con artist - they in turn get exposed and the 'customer' is informed - who in turn asks their new friend to hurry up and forward the cash. Surely the regulator should be updated rather than L&G's customer?

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As with everything it should be taken on a case by case basis. The rules do allow for connected sharer purchases but there are tax charges in certain cases so extreme caution should be used.

It should also always be borne in mind that a SIPP is a pension scheme - and should be invested with this in mind. Unquoted shares in the member's company could be a viable option for a few cases but shouldn't be used as 'pension liberation'.

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@ TW

I have been doing further research and, although it may be allowable, you will be hard pushed to find a SIPP provider who would take the case on. The key here is; is this a Genuine Divest Commercial Vehicle or simply a case of an asset being developed for Pension Busting?

The shares in question are Preference shares which have yet to be issued and will only be available to the SIPP scheme which has one member, a controlling director and major share holder. Any one fancy their chances with HMRC on this one?

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Thornton Wells

Mar 01, 2013 at 12:30

Hi John, we (Mattioli Woods) are a SIPP (and SSAS) provider and are happy to work to the full extent of HMRC rules.

You have however hit the nail on the head - the key question is whether the client is really wanting to invest their pension in this way or if they just see it as a way to get cash out of the pension.

On the technical side the concern would be underlying taxable property in the company as it sounds like the member would have more than 20% shareholding.

Happy to chat it through directly if that would help?

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