The most trumpeted aspect of George Osborne’s Budget 2014 was undoubtedly his self-proclaimed “most far-reaching reform to the taxation of pensions since the regime was introduced in 1921″. However, alongside this much needed shake up of the pensions system came an equally vital but less newsworthy change: greater action against pension liberation.
Budget 2014 has granted new powers to HMRC to defend against pension liberation fraud, with a notice on HMRC’s website highlighting the tighter rules that a scheme must adhere to in order to be registered by HMRC.
HMRC may now request more information from schemes attempting to register, and has more leverage to refuse registration.
HMRC may now refuse registration if it believes that the pension fund isn’t set up to provide pension benefits or the scheme administrator is unfit to run a pension fund. Furthermore, HMRC may now request more information from registering schemes than previously.
The aim of these measures is to aid HMRC in the identification of pension schemes which are a front for pension liberation scams. Official figures estimate that pension liberation scams took around £600 million in the past year.
HMRC will now be able to fine those providing false information up to £3,000, as well as refusing registration if it suspects a scheme may be linked to pension liberation.
The treasury stated that these new powers will ensure those claiming pension relief will withdraw their tax-relieved contributions as a pension and not a bogus withdrawal from a pension liberator.
Last year The Pensions Regulator dealt with 27 pension liberation cases, which included dozens of different schemes and millions of pounds, and currently a further 47 cases are being investigated.
It’s hoped that these new measures will effectively curtail the pension liberation, which has proved a resilient and adaptable type of fraud. Pension liberators have often switched tack as HMRC and The Pensions Regulators’ net has closed in on them, targeting different kinds of pension schemes and different savers in order to avoid detection.