Pension Liberation: the hugely disproportionate response so far
Pension Liberation the current bogey man behind some regulation on the hoof.
As sadly predictable as an episode of EastEnders, this is the sorry tale of the developing situation in the war against dodgy transfers. Like all wars, there is collateral damage which in this case is the non-dodgy transfers and the clients trying to make them, which is a pity as they represent the vast majority of those coming unstuck at the moment.
Anyway, what began as a whisper of things slightly amiss has turned into full blown bellowing of things being handled very poorly indeed, things causing huge damage to all parts of the financial services sector and more importantly, to a not insignificant number of clients.
Not that long ago we were having lunch with some friends and business associates of ours and the subject of Pension Liberation came up. ‘Have you had any transferring scheme providers write out to the clients with a ‘are you sure you want to do this letter’’? they asked. At the time we hadn’t and we thought it odd that if a Client, their IFA and the chosen receiving scheme provider had jumped through all the usual hoops to make a transfer happen, then what right did the transferring scheme provider have to operate outside of this process and add an additional and unnecessary tier that at best confuses the client and wastes time but potentially infers that the client is an idiot, the IFA is a crook and the receiving scheme provider isn’t being run in compliance with HMRC regulations? The answer, it seemed, was that the transferring scheme provider was merely acting in the interest of the client and ensuring that the proposed transfer was not a case of Pension Liberation.
It’s enough to make you feel all warm and fuzzy inside to think that a provider, most likely offering mediocre customer service and access to a woefully limited range of bland investments (which in the majority of cases will have at least been contributing factors in the decision to transfer away from them in the first place), is taking it upon itself to make sure their client is being dealt with properly and appropriately. How very client focused of them.
Despite being a fairly cynical bunch, we assumed this was to be a brief trip to silly town and that normal service (transferring scheme providers using the normal set of tools at their disposal to delay the transfer) would resume soon enough. Such naivety; how wrong were we!
In the months that have passed since that lunch meeting, we’ve been on the receiving end of exactly the same treatment a number of times, leading to delays to critical transactions that in our case, clients needed to make in a specified and tight timeframe and had nothing to do with anyone raiding their funds.
We of course understand and support the need to stem what is being billed as a veritable flood of liberation cases and we condemn anyone engaged in that activity. Something needed to be done after the door had been left wide open for this abuse by HMRC themselves when they binned the need to have a Pensioner Trustee and allowed people to take on all responsibilities themselves.
However not only are providers (specifically the large, clumsy, silo based providers) routinely wasting everyone’s time, including their own, by writing to clients who have already made it clear that they wish to transfer, asking them if they wish to transfer, but now HMRC have cobbled together a new process for scheme registration which aims to check the bona fide nature (or otherwise) of any given transfer. That’s fine and we welcome it in principal, but you’d be hard pressed to arrive at anything as bad as the dogs dinner we have been served up if you gathered a group of year 4 students together to thrash it out after force feeding them litres of cola and sweets.
We’ve kind of gone back to the days of sitting and waiting for a certificate to turn up in the post without the comfort of knowing that those adjudicating on the process know what they are doing and are following some kind of logical process.
Although, whilst it might be a blip, we have glimpsed a light at the end of this annoying tunnel in the form of a pattern potentially emerging, relating to schemes with Sponsoring Employers who have a track record of trading and paying tax having an easier time of clearing the registration process. If this is true, this is good news for long established bona fide companies with bona fide reasons for establishing a SSAS. It is however at best indifferent news to bona fide new companies with bona fide reasons for establishing a SSAS. Presumably for the foreseeable future, any clients matching that latter description could be waiting for months just to find out whether their scheme is deemed ok by HMRC.
Whilst one hopes and even dares to assume that things have improved in the last few weeks, a recent case involving one of our clients only a month or so back, revealed that the ‘team’ at HMRC, assembled to oversee this new Liberation Busting two stage registration process, consisted of two people. Yes, two people and the evidence available suggests that these individuals are kept in a basement with no contact with the outside world. Should they not approve a scheme (on grounds that from our experience could be worryingly spurious) you have the right to appeal.
However, you will not receive confirmation that your appeal has been received, you will not receive notification of how long you’ll have to wait for a decision on it and you will not be informed of who is handling the case for you. Well, that all seems reasonable.
However for one thing, how do you reconcile what is currently standard practice to block what might be perceived as an attempt at Pension Liberation (though it seems to us that the tools used to measure this risk were knocked up on a Friday afternoon by the lad on Work Experience) and Treating Customers Fairly? Satisfying TCF and taking extra measures to guard against Pension Liberation are not currently entirely compatible policies.
Ahh but of course, it’s SSASs that are being targeted for liberation and being an unregulated product; TCF does not apply. But what of SIPPs (or any other personal pension for that matter) transferring into a SSAS? Isn’t it Outcome 6 of TCF that states: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint. So how is placing barrier after barrier in the way of a perfectly reasonable transfer not a breach of TCF? I suppose that’s why ‘reasonable is in there in the first place; it’s nice and elastic.
Furthermore and whilst we are at it; Outcome 3 states: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale. So in a similar vein, how is forcing both ceding scheme provider and new provider into a situation where they have no information to pass on to the client, possibly for months on end, not putting those same providers automatically in breach of this outcome no matter how much they might want to keep their clients informed?
All we can do is hope that before too much longer HMRC settle on a sensible, workable process for registering new SSASs and that in the meantime, they dedicate sufficient resources to live cases as well as sufficient consideration to the clients, who after all are ultimately on the receiving end of all this and precious few of those clients, or their advisers are engaged in Pension Liberation.
Until then (and no doubt afterwards too) we all have to live with the fact that the various regulators, who don’t talk to each other and have different and sometimes unhelpfully conflicting remits, do have one thing in common; a devotion to the old proverb, do as I say, not as I do.
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P R Smyth, Client
PSG SSAS (UK)
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