Pension Liberation Schemes

Oral Answers to Questions — Work and Pensions – in the House of Commons at 2:30 pm on 11th March 2013.

Alert me about debates like this

Photo of Grahame Morris Grahame Morris Labour, Easington 2:30 pm, 11th March 2013

What steps he is taking to tackle the increased use of pension liberation schemes.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

We take the issue of so-called pension liberation very seriously. The Pensions Regulator is currently investigating 21 cases, and scheme assets worth over £50 million have been protected as a result of regulatory action.

Photo of Grahame Morris Grahame Morris Labour, Easington

Many pension liberation schemes are skimming off thousands of pounds in charges and commissions, and leaving customers exposed to punitive tax penalties. In the wake of mis-selling scandals such as that involving payment protection insurance, what action is the Minister taking to ensure that future pensioners are protected?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

The hon. Gentleman is right. When people transfer money from a pension, they must fill in transfer forms. We have established a “scorpion sting in the tail” information campaign, producing very eye-catching literature which people wishing to transfer their money receive before signing on the dotted line. It is a “buyer beware” measure, and is one of a suite of measures that we are taking to crack down on such fraud.

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

Many participants in pension liberation schemes pay extremely high interest rates on any loans that are taken out, and residual funds are invested at the discretion of the trustees, which can lead to insecure or poor investment decisions. Does my hon. Friend agree that that is in no one’s long-term financial interests?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

My hon. Friend is right. We are warning people to be extremely wary. In general, they should not get their money out before they reach the age of 55, except in the event of, for instance, terminal illness. Trustees need to be wary, and participants need to be wary. Those who spot fraud should report it, and we will continue to crack down on it.

Photo of Gisela Stuart Gisela Stuart Labour, Birmingham, Edgbaston

Some £400 million has been liberated illegally from pension funds, and all that the rather incurious Minister is saying is that he has produced some rather catchy literature. Is that sufficient?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

If that were all we had done, no of course it would not be. Many of the Government’s anti-fraud authorities, including, among others, the Serious Fraud Office, are working with us. One of the challenges is that the money is sometimes transferred overseas, where we have less jurisdiction. However, what we need is trustees not to be transferring money—authorising the transfer of money—out into suspicious pension funds. So trustees have a part to play, as do scheme members.