Scamming is not alright, pension scamming is not alright – ever.

One of the ruses that pension scammers used to get legitimacy for their activities was to claim that money would be transferred by an HMRC “approved” occupational pension scheme. Approval implied endorsement, even though anyone can get an occupational pension scheme set up with HMRC for next to nothing.

But when a pension scheme turns out to be a scam, does that mean it is no longer a pension scheme. In an important ruling last week, the Pensions Regulator won the right to have scam schemes set up under occupational pension to be continued to be regulated as such. You can read about it here

The judgement means that TPR can appoint its own trustees who can manage what’s left of member’s benefits to minimise their loss. Organisations such as Dalriada and Pi offer just such trustees and many of them are hard at work securing money for members before the fees take more out of the scheme than is in it (see Jarndyce v Jarndyce – C Dickens)

But this is very much shutting doors after horses have bolted

What the Pensions Regulator has woken up to , is that occupational pension schemes can be used for gain and that gain comes in many guises.

We would not consider the funders of the L&G, Lifesight, SEI or Aviva master trusts scams because they return money to shareholders. Nor would we consider Nest or People’s any different from the for-profit master trusts, their model is to compete against for profit and reward management for doing so. So all master trusts operating in the workplace pension AE space are regulated in the same way – using the Master Trust Assurance Framework as a means of maintaining standards across the piece.

Nowadays, any multi-employer operating commercially is subject to a much higher level of scrutiny by TPR. The idea is that standards are comparable with those at the FCA who supervise workplace pensions written under contract rather than trust law and as individual personal pensions rather than as member pots. The evaluation of these schemes will increasingly be based on achieved outcomes using the Value for Money metrics.

It is difficult to see any of the scamming occupational pension schemes would have survived five minutes under the master trust assurance framework.

What is an occupational pension scheme?

This question has been one that I’ve been thinking a lot about as I develop Pension SuperHaven with Edi Truell.

The Ironstone Judgement mentioned above makes it clear what the tests are

In determining whether a scheme is an occupational pension scheme (within the meaning of the Pension Schemes Act 1993), the Court stated that both the ‘purpose’ and the ‘founder’ tests have to be satisfied.

The ‘purpose’ test – this asks if the scheme is established for the purpose of providing benefits for people with service in employments or for such people and other people.

Broadly, the “founder” test requires that the scheme be established by, or by persons who include an employer. This means asking two further questions:

• Does the ‘founder’ test actually require the founder of the scheme to employ a person at the time the scheme was established?
• If the answer to the above question was yes, did the founder employ a person at that time?

In 2004, HMRC had issued its own definition of what is an occupational scheme

Occupational pension schemes

Section 150(5) Finance Act 2004

As the name suggests, occupational pension schemes are set up by an employer (known as a sponsoring employer) to provide benefits for or in respect of:

• its own employees
• employees of any other employer.

Occupational pension schemes may also provide benefits to or in respect of any other person who is not an employee of any employer in the scheme. Therefore, if the scheme rules allow it, anyone who is not an employee of any employer in the scheme may join the scheme (although this would be unusual).

That highlighted section is what gave the scammers licence to operated occupational pension schemes for the general public and it’s also what allows PSH to offer itself to steelworkers and others who want to turn pot to pension.

So – ironically – the means to rectify and create wrong can both be an occupational pension scheme.

What does this tell us?

The clue is in the title of this blog. Just because there’s an occupational pension scheme involved, doesn’t make it alright.

We have a Pensions Regulator to make sure that bad schemes are weeded out or aborted at birth. The standards that TPR set are important to public confidence.

As Terry Hall opined in the Specials’ song, so we can say of scamming

“There’s no excuse in the world, that could ever make it alright”