Standard Life, LV= and Zurich have all spoken out against the practice this week, revealing their own initiatives to drive out pension schemes that encourage consumers to unlock their pensions early but without informing them of the huge tax penalty and exorbitant costs.
Philip Brown, head of retirement propositions for LV=, said: “We fully support the action being taken against these people. For several months we have been blocking transfers proactively if we suspect any wrongdoing. We look at whether we have dealt with the pension fund to whom the consumer wishes to transfer, and have had a few tough conversations with customers about the practice.“Our aim is to protect the customer, as what some of these firms are doing will not be legal.
“As a provider, I’d rather apologise for the delay of a transfer than allow customers to lose money. Many of the websites run by these firms look legitimate and most customers will not have the benefit of our experience.”Dave Lowe, head of corporate propositions for Zurich, said: “We support this campaign. We are aware of the increased activity around pensions liberation and we are reviewing our processes and procedures to address this issue.
“We are obviously concerned that potentially vulnerable customers might be taken advantage of through these pension liberation schemes and would fully support industry, government and regulatory actions to make it more difficult to establish and run schemes for this purpose.”
A spokesman for Standard Life said: “If we have grounds to suspect that the receiving scheme might possibly be involved in pension liberation, we will block the transfer and inform The Pensions Regulator that we have done so.”Last week, City of London Police dismantled a suspected organised crime gang that was believed to be cold-calling and text messaging pension holders with fraudulent liberation offers.The action was part of a multi-agency operation and further arrests were made in Scotland and Cheshire.
Steve Head, a commander for the City of London Police, said: “Pension liberation fraud is the new ‘boiler room’ fraud phenomenon as fraudsters seek to exploit new opportunities thrown up by the changing economic climate.
“The promise of maximising returns on your pension savings may seem to make good financial sense but the reality is that people could fall into a terrible trap which has the potential to destroy a retirement.”
He added that thousands of people were estimated to have released up to £400m into high-risk and non-existent investment schemes, many of which were based overseas.Last week Kate Smith, head of pensions for Aegon UK, warned that the practice could “derail auto-enrolment” and claimed it was too easy to set up a pension scheme with HM Revenue & Customs.