Another questionable area of pension sales is now under investigation by Opra. Opra – the Occupational Pensions Regulatory Authority – was set up by Parliament under the Pensions Act 1995 to help make sure that occupational pension schemes are run safely and properly. Opra investigates and can take action where there are breaches of the Pensions Act. Opra has a wide range of statutory powers and penalties which include imposing fines, authorising criminal prosecutions and referring cases to police and other prosecuting authorities.

The area which Opra is now investigating is the promotion of "pension liberation schemes". On 3 May 2002, Opra issued the following Press Release. You should take note of Opra’s warning if you have been approached by the organisers of such a scheme.

OPRA WARNS AGAINST PENSION LIBERATION
Opra is working with the Inland Revenue to look into several organisations offering pension liberation services.

Opra chairman Harriet Maunsell warned the public to be on their guard against these schemes, which claim to convert your pension into an immediate tax free lump sum. This practice is sometimes referred to as "trust busting".

The organisers of these liberation schemes use adverts to attract people who urgently need cash. The adverts offer to turn pension benefits into a tax free lump sum. However the people offering this service usually charge high commissions ranging from 20 to 30% of the individual’s total fund.

Transactions are often arranged using offshore companies and bank accounts. Typically, the individual’s existing pension scheme will receive a request from the pension liberator to transfer their pension money to a scheme in the name of a fictitious new employer created solely for the purpose of trust busting. Harriet Maunsell warned consumers:

"If you get involved in this kind of scheme you are taking a high risk with your pension benefits – the rewards are questionable to say the least, and the organisers are likely to be unscrupulous. As well as paying up to 30% of your money in commission to the "liberators" you could also end up paying as much as 40% tax on the total amount as well. Altogether that means you could lose 70% of your pension money."

The government offers tax relief to pension funds to help people build up provision for retirement. Opra, the Department for Work and Pensions and the Inland Revenue have all expressed concern about individuals losing their hard-earned pensions savings and then not having a decent income in retirement.

http://www.opra.gov.uk

The following text is reproduced from OPRA's leaflet. . . ."don't risk losing your pension money":

Don’t risk losing your pension money

Who are OPRA?

OPRA (the Occupational Pensions Regulatory Authority) is the UK regulator of pension arrangements offered by employers.

Our main aim is to get problems put right and to make sure that pension schemes are run in a way that follows the law.

We are aware that currently several organisations are offering to provide pension scheme members with cash instead of pension benefits.  This is known as “pension liberation”.

The way these pension liberators work is that they send the trustees of a person’s existing pension scheme a request asking them to transfer pension money to a scheme in the name of a fictitious new employer.

Members who transfer their pension benefits to these schemes will lose almost all of their “liberated” cash.  Here’s an example.

Example
Let’s say your pension scheme would provide you with a transfer payment of £10,000.

If you transferred your pension benefits to a pension liberator, you could lose 30% of your money through commission, and possibly another 30% or more through income tax. As a result of transferring your benefits under these circumstances, you would be left with only £4,000. And you will have lost your pension benefits when you come to retire. We have asked your pension scheme trustees to warn you about this.

Things you need to know

Take Note
We are recommending pension scheme trustees take extra precautions when members request a transfer of their benefits.  So, the trustees of your old scheme may ask you to provide copies of:

• your contract of employment;

• pay slips from your new employer; and

• a copy of your new pension scheme’s booklet.

Also, we are suggesting that if trustees are suspicious about a transfer request, they should delay making payment and let you, the member, know what’s happening.  You and the trustees of your new scheme can complain to OPRA if you are unhappy with such a decision.

How to contact Opra

OPRA
Invicta House
Trafalgar Place
Brighton
BN1 4DW

Help Desk:  01273 627600 Monday to Friday 9am to 5pm.
Help Desk Fax:  01273 627688

E-Mail:  helpdesk@opra.gov.uk

Web Site:  www.opra.gov.uk

If you would like a copy of this OPRA leaflet, please contact The OPRA our Help Desk on 01273 627600.