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UK 2014 budget gives HRMC more pension liberation powers
| Published: | 24 Mar at 6 PM |
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As an adjunct to Chancellor George Osborne’s budget announcement, HMRC has set out now rules as regards pensions which will be included in this year’s Finance Bill.
The main focus of the rules is to lower the risk of pension fraud by allowing HRMC to refuse registration of a pension scheme if it considers the administrator is not a ‘fit and proper person’ or the fund itself is not set up to offer pension benefits. HMRC’s investigative powers will also be widened, allowing it to ask for extra information on schemes requesting regulation.
Should any new scheme be suspected as a front for a pension liberation scam, registration will be refused, and the giving of false information will attract fines of £3,000. Pension liberation scams involve bogus funds which allow retirees to draw down their cash before the official retirement age, and can cost as much as one third of the entire value of the fund.
Advisors involved in mis-selling pension liberation schemes to expats as well as UK residents fail to make it clear to their clients that the revenue department will take 55 per cent as tax on unauthorised withdrawals, leaving the client with only a fraction of his savings after advisor charges have been paid. The new rules will close loopholes in present pension law, allowing the authority to tackle liberation vehicles masquerading as pension plans.
According to the regulator, suspected pension libration schemes in 2013 took in over £600 million, with HMRC investigating 46 cases. The UK financial ombudsman is also investigating a number of consumer complaints about the refusal by pension providers to transfer money to suspected pension liberation schemes.
The main focus of the rules is to lower the risk of pension fraud by allowing HRMC to refuse registration of a pension scheme if it considers the administrator is not a ‘fit and proper person’ or the fund itself is not set up to offer pension benefits. HMRC’s investigative powers will also be widened, allowing it to ask for extra information on schemes requesting regulation.
Should any new scheme be suspected as a front for a pension liberation scam, registration will be refused, and the giving of false information will attract fines of £3,000. Pension liberation scams involve bogus funds which allow retirees to draw down their cash before the official retirement age, and can cost as much as one third of the entire value of the fund.
Advisors involved in mis-selling pension liberation schemes to expats as well as UK residents fail to make it clear to their clients that the revenue department will take 55 per cent as tax on unauthorised withdrawals, leaving the client with only a fraction of his savings after advisor charges have been paid. The new rules will close loopholes in present pension law, allowing the authority to tackle liberation vehicles masquerading as pension plans.
According to the regulator, suspected pension libration schemes in 2013 took in over £600 million, with HMRC investigating 46 cases. The UK financial ombudsman is also investigating a number of consumer complaints about the refusal by pension providers to transfer money to suspected pension liberation schemes.
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