London - Britain's tax authority is stepping up its scrutiny of new pension schemes, aiming to make it harder for fraudsters to dupe savers into transferring money from schemes where they were better off.
The HMRC tax authority said on Monday that schemes would no longer be automatically registered to receive funds as soon as an online form was received, and that applicants would be subject to more detailed scrutiny.
“We have moved away from a 'process now, check later' approach”, it said in a statement.
The pensions industry has lobbied the government in recent months to crack down on so-called pension liberation, where people are persuaded to dip into their retirement pots before retirement age.
Individuals are talked into transferring their pensions but are often not told they will face hefty tax and other fees potentially adding up to more than half their savings, according to Britain's Pensions Regulator.
In a statement issued alongside the HMRC's, the regulator also highlighted that individuals are often not aware that their money is being transferred into “high risk and entirely unsuitable offshore investments.”
The scam was made easier by the salesman's ability to register a scheme that could receive funds merely by submitting the online form to HMRC, which would only be properly scrutinised at a later date.
“Pension liberation is on the increase with promoters using increasingly more sophisticated liberation models to encourage taxpayers to put their hard-earned savings at risk through liberation,” HMRC said.
Tom McPhail, head of pensions research at investment manager Hargreaves Lansdown, said UK authorities must do more to combat the problem.
“These measures will help but there is no magic-bullet solution ... It isn't always possible to even prove that fraud has been committed and whilst some of the fraudsters have been pretty inept, they are becoming more sophisticated,” he said. -Reuters