Last month Her Majesty's Revenue and Customs (HMRC) introduced changes to the way in which it will register pension schemes going forward and how it will deal with requests to confirm a scheme's registered status. These changes have been implemented in an attempt to combat the perceived growing problem of pension liberation fraud.
Our Pensions experts consider the changes introduced by HMRC and their likely impact.
Last month HMRC introduced changes to the way in which it will register pension schemes going forward and how it will deal with requests to confirm a scheme's registered status. These changes have been implemented in an attempt to combat the perceived growing problem of pension liberation fraud. HMRC has been working with several government agencies to combat pension liberation fraud.
Amid criticism that more needed to be done, HMRC has introduced the following changes with effect from 21 October 2013:
Registering a pension scheme
HMRC will no longer automatically register a pension scheme upon receiving an online registration form. Instead, HMRC will conduct a detailed risk assessment before deciding whether or not to register a scheme.
Historically, schemes would automatically receive registered status upon submission of the relevant form. This meant that there was a possibility that HMRC would register schemes and later discover that they should not have done so as they were (for example) purely intended to be a pension liberation scheme. This change should reduce the number of such bogus schemes available for use in pension liberation schemes and hopefully lead to a reduction in the number of transfers into them.
Transferring pension funds between registered pension schemes
Pension scheme trustees faced with a transfer request to a scheme they suspect is involved in a pension liberation scheme will be able to ask HMRC to confirm whether the scheme is registered. HMRC will only confirm that such a scheme is registered if the receiving scheme is actually registered and the information held by HMRC does not indicate that there is a significant risk that the scheme is a pension liberation scheme. When HMRC cannot provide the aforementioned confirmation, it will send a response setting out the conditions in which HMRC will confirm registration and explain that one or more of these conditions are not satisfied. In all cases HMRC will respond to such requests without obtaining consent from the receiving scheme.
It is clear that HMRC are attempting to stamp out pension liberation fraud. However, the procedural changes do not create a fool proof system. First, whilst the new registration process will undoubtedly reduce the number of "dodgy" schemes that are registered, it is clear that there are already a number in existence and there is no guarantee that some new schemes will not still slip through the net. HMRC makes the point that trustees should also make their own investigation rather than simply rely upon its response. Second, and more significantly, it has become clear, having spoken to HMRC, that in some cases it could take several months to receive confirmation. This means that schemes which request confirmation from HMRC may find that they do not receive a response within the statutory deadline for making a transfer thereby putting the trustees at risk of Regulator sanction or Ombudsman complaints if the scheme turns out to be bona fide.
It is likely that HMRC will have to fine tune these changes especially in regard to the time it could take to provide confirmation. However, the current changes are a step in the right direction.
This article first appeared in lexology.com.