Legal action by The Pensions Regulator has put a stop to five connected pension ‘liberation’ schemes that received transfers totalling more than £134 million from over 1,400 individuals.
The regulator was concerned that the schemes were established with the main purpose of providing a cash payment to the member rather than providing retirement benefits and that this constituted misuse or misappropriation of pension scheme monies within sections 15 and 16 of the Pensions Act 2004, and pension liberation as defined in section 18 of the Pensions Act 2004.
Following an investigation, the regulator commenced High Court proceedings in July 2013 against A Admin Ltd, Warwick Pensions Administration Ltd, Lincoln Pensions Administration Ltd, Baxendale Walker LLP, and Paul Baxendale-Walker.
The schemes operated according to complex arrangements that purportedly enabled funds to be ‘lent’ to the member via a company under the member’s control, which would become their employer under one of the schemes. The member could then use the money as they wished.
The schemes sought to allow members to access their pension funds as cash through a supposed legal ‘loophole’. In May 2014, the High Court ruled that this supposed gap in the law did not exist, finding in the regulator’s favour on three preliminary legal issues.
The defendants (who had previously provided undertakings to the court not to operate the schemes until a full trial of the regulator’s claim had taken place) have signed a legally binding agreement confirming that the:
- five schemes are wound up
- relevant defendants no longer act as trustees of the schemes
- schemes are not able to accept transfers from any other pension schemes
The regulator has today issued a report on the case using its powers under section 89 of the Pensions Act 2004. You can find the report in section 89 reports.
Andrew Warwick-Thompson, Executive Director at The Pensions Regulator, said:
“Our action in this case sends a message to anyone operating in this marketplace that we will take action to shut down schemes that pose the greatest risk to members’ pensions, and which may, as a result, undermine confidence in the pensions system generally.
“This was one of the biggest, most highly-organised pension ‘liberation’ exercises we’ve seen. It spread quickly as a result of marketing by a network of introducers who attracted individuals by direct marketing including cold-calling. Fees of 11% - totalling more than £14.7 million - were charged to implement these transfers.
“When challenged in the High Court, the defendants’ strategy was clearly shown to be based on an incorrect interpretation of pensions law. The relevant defendants have now agreed to wind up the schemes, preventing them from being used in similar attempts to attract transfers from members.”
“Those caught up in these schemes may face tax charges, even if they were told that the payments would be free of tax. This would have been the case whether or not we had intervened. Our aim was to ensure that the schemes were closed before more people were enticed to transfer their pension pots into these schemes. Where members feel they have lost out, these legal proceedings leave the way open for them to take their own legal action.”
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