HMRC has announced changes, effective immediately (from 21 October 2013), to strengthen its processes for scheme registration and transfers in order to deter pension liberation. The increase in the marketing of "cash-in" products claiming to enable members to gain early access to their pension pots has been causing headaches for scheme administrators wrestling with the competing statutory requirements to make a transfer-out on request from a member and making only authorised payments from a registered pension scheme. HMRC's new processes will not remove the problem altogether but should make life somewhat easier for scheme administrators.
It is often advisable for transferring schemes to ask HMRC to confirm the registration status of the receiving scheme before making a transfer. However, that confirmation has of necessity been of limited assistance, since registration has to date consisted only of successfully completing and submitting an online form. HMRC has therefore tightened both the initial registration process and the way it responds to requests from a transferring scheme for confirmation of the registration status of the receiving scheme.
Scheme registration no longer automatic
Registration will no longer be confirmed on successful submission of the online form. Instead HMRC will conduct a detailed risk assessment and may ask for further information before deciding whether or not to register a scheme. This is not quite a return to the pre-A-Day Revenue approval regime but it should result in greater control over schemes which are permitted to register.
Transfers: good news for scheme administrators
To help scheme administrators decide whether to make a transfer, HMRC has changed its process for responding to requests for confirmation of the registration status of the receiving scheme:
- It will no longer seek consent from the receiving scheme.
- It will provide confirmation of registration only where the receiving scheme is registered (and not subject to a deregistration notice) and the information held by HMRC does not indicate a significant risk that the scheme was set up, or is being used, to facilitate pension liberation. If one or both of these conditions are not satisfied, HMRC will contact the receiving scheme to give it an opportunity to resolve any issues and if these are not resolved within three months, HMRC will notify the transferring scheme that the receiving scheme's registration status is not confirmed.
There are some caveats:
- HMRC's response will be based on information available at the time;
- any confirmation provided is not to be taken as a recommendation of a scheme or product by HMRC; and
- this should not be the only check that the scheme carries out and relies on – it should make further checks before making a transfer.
HMRC states that schemes will need to notify individuals wishing to make a transfer that the process may take a long time: "It may be several months after your initial request before you get any response from HMRC. You should therefore bear this in mind when considering the timing of your request to HMRC." This should be of some help to scheme administrators: it is to be hoped that the Pensions Regulator would not impose penalties on a scheme which had failed to make a transfer only because it was still waiting for confirmation from HMRC of the registration status of the receiving scheme.
HMRC pension liberation materials
Update (joint publication with the DWP and the Pensions Regulator)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.