High Court decision
A number of trust-based pension schemes with rules saying they were both occupational pension schemes and personal pension schemes were today held by the High Court to be occupational pension schemes. These terms are defined in pensions legislation in such a way that a scheme cannot satisfy both at once.
This immediate impact of the decision is that the schemes are open to Regulator's statutory enforcement powers. In its press release, the Regulator has welcomed the decision.
Personal pension schemes, on the other hand, are largely regulated by the Financial Conduct Authority.
Although the decision turns on technical points, the judge explained that the background was the Regulator's concern over the genuineness of the schemes. This issue might be considered in court in future.
The decision will help transferring schemes by clarifying the Regulator's jurisdiction to take regulatory action against prospective receiving schemes that would effectively block transfers.
HMRC measures
From today HMRC has introduced new measures that will help schemes identify transfer requests that might lead to liberation.
They are not fail-safe, however: schemes must still do their own due diligence.
A full answer to liberation requires steps by a number of actors other than HMRC and transferring schemes.
New schemes
HMRC will no longer give a newly established scheme registered status automatically on application. Instead it will take time to make checks and ask questions. Meanwhile, transfers to the new scheme will be unauthorised payments for tax purposes.
Lack of registered status will often be a legitimate ground for a scheme to refuse a transfer request.
Registration status
HMRC will now respond to enquiries about the registration status of a receiving scheme without seeking its consent.
It will only confirm registration if:
- the scheme is registered and
- it has no information pointing to a significant risk that the scheme is involved in liberation.
Otherwise HMRC will reply by saying which of these conditions is not met.
Due diligence still vital
HMRC emphasises that its new processes are not a complete answer e.g. because it can only act on information it holds at the time.
Schemes faced with transfer requests still need to do their own due diligence too.
Factsheet
HMRC summarises the tax consequences of liberation in a factsheet.
It reiterates that it will normally pursue the heavy tax charges that liberation leads to. The only, wintery comfort is that it will not generally do so where the money has disappeared, been stolen or become locked in dubious investments.
The factsheet is another useful piece of official information (alongside the Regulator's materials and others) that schemes can refer members to when they make transfer requests.
HMRC's announcement.
Our briefing on pension liberation fraud.
For more information, please contact Richard Knight .