The trade press has been running stories about self-styled "pension liberation" schemes which (for a fee of up to 30% of the transfer value) offer to convert the unsuspecting member’s deferred pension into an immediate tax-free lump sum, via an occupational scheme set up specifically for this purpose. Opra has warned consumers that they risk paying 40% tax as well as the liberator’s fee, raising the hit to 70% (not to mention Revenue penalties for failing to own up). The scam was covered by the national press when it first broke in mid-late April, but unfortunately the red-tops hardly touched it. Reports focused on door-to-door salespeople in the North-West of England targeting employees recently made redundant.

More recently, IR SPSS has weighed in with Pensions Update No 132, which on 17 May 2002 announced changes of practice. Under no circumstances now may a transfer payment be routed via an independent broker. (Readers with long memories may recall the Hill Kestrel scam in the late eighties, whereby transfer value cheques were used by intermediaries to purchase immediate vesting lump sum products instead.)

If the receiving scheme is insured, the payment must go directly to the life office; if it is a SSAS, directly into the bank account of which the pensioneer trustee is a mandatory co-signatory (the PT must also confirm in writing that the transfer is to go ahead). If the member asks for the transfer to any other kind of occupational scheme, the ceding scheme must get the other scheme’s permission to check its approval status with the Revenue, and should do just that if they have the slightest suspicion about its bona fides. In the particular cases which have stimulated this regulatory action, suspicions may be aroused by receipt of multiple requests to transfer to the same (hitherto unknown) scheme, often with an unusual degree of urgency attached.

Although only one culprit has been named so far, ie the so-called ‘Brand New Carpet Company’, shortly Opra is likely to announce the appointment of an independent trustee to a second scheme, also operating in the Liverpool/North-West region.

Update 132 reiterates existing constraints on certain transfers, eg

1. any transfer involving a SSAS requires prior written consent from IR SPSS; and
2. an occupational scheme awaiting approval under Chapter I must not get involved in any transfer involving a PP; nor may it accept a transfer from anywhere else without prior written consent from IR SPSS.

Schemes are reminded that although a member may have a statutory right to a transfer, that right does not extend to specifying a particular scheme to receive it (unless it is a stakeholder scheme) ; nor to a transfer to a scheme which does not provide approvable benefits on death or retirement (and is therefore not an occupational pension scheme).