Pension liberation – striking the right balance

Do you know the warning signs? We consider the current position with the ever-developing pension liberation landscape.  

Pension liberation is wide-reaching and can cover any form of possible unauthorised use of pension monies. It is defined from a legal perspective but, in summary, money is taken to be liberated if:

  • A transfer is made on the basis that a third party will secure the amount in an authorised way.
  • The amount is not used in an authorised way.
  • The third party has not secured, and is not likely to secure, that amount in an authorised way.

For the industry, attempting to avoid pension liberation creates the difficulty of striking a balance between allowing individuals to do what they wish with their own money and trying to protect individuals from making life-changing mistakes.

Latest developments

While pension liberation is nothing new, the tactics used by pension scammers to encourage people to transfer their pension savings is evolving. The balancing exercise now has to be considered in the light of the April 2015 pension changes, where individuals have greater flexibility to access their pension savings. Unsurprisingly, perhaps, Action Fraud has reported that pension liberation fraud has tripled in the month following the new pension freedoms. Similarly, the Pensions Ombudsman has reported a significant increase in the number of pension liberation complaints being investigated. The new Pension Wise service has reportedly been used nearly 950,000 times since it was started in April this year.

The “right” balance

As trustees have a duty to act in the best interest of the member, they will be anxious to not incorrectly process a transfer if there is the possibility that there is a fraudulent pension liberation scheme. Practically, where there is a statutory right for the member to transfer, trustees will be required to make the transfer in a timely fashion. However, in the absence of a statutory right, the onus remains on the trustees to make the fundamental decision. To support trustees, the Regulator has introduced the new code of good practice “Combating Pension Scams”, published in March 2015. The code provides examples of standard documents for trustees to use in their transfer process to help identify pension scams.

Undoubtedly, however, the industry remains in a difficult position when faced with a member who continues to request the payment of a transfer value to a suspicious pension scheme that is registered with HMRC. Some reassurance was provided in the recent Ombudsman determination of Hughes (PO-7126), where an administrator of a personal pension scheme was found to have properly exercised its discretion under the rules to refuse to transfer a member’s benefit, due to genuine concerns over the status of the receiving scheme.

Additionally, although the responsibility remains firmly with the trustees, the new material added to the Scorpion campaign  by the Pension Regulator, as featured in the Regulator’s “Scams Awareness Month”, has emphasised to consumers that they also have their part to play in arming themselves with the facts.  

If you have any questions or would like more information, please contact one of our pensions specialists below.

Author: Lucinda Burgoine

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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Tim Green

Partner - Head of Pensions

I am a Partner in the Pensions team with a broad advisory, transactional and dispute resolution practice.

Colin Greig


I have extensive experience of providing clear, practical advice to employers, trustees of pension arrangements, institutions and individuals on a wide range of pensions issues.

June Crombie

Partner - Head of Pensions (Scotland)

As Head of Pensions in the Scotland office, I bring over 26 years’ experience to my clients to help them to make better decisions and achieve their aims.