More and more people are becoming attracted to the idea of breaking open their pension piggy bank as the way out of debt.

Plenty of help to do so is on hand from the burgeoning pension liberation industry; sometimes disguised as 'pension loans'. Not all the perpetrators bother to ask if the target has reached age 55 though, normally necessary for the 'liberated' cash to be treated by HMRC as an authorised payment.

In a new offensive this month against "the predators stalking pension transfers", The Pensions Regulator (TPR), in conjunction with the Pensions Advisory Service, HMRC and several crime-fighting arms of Government, declares this activity can be fraudulent where individuals are not informed, or are misled, about the consequences. That word 'fraud' is important, because cashing in a pension early is not in itself illegal: under the Finance Act 2004 unauthorised payments attract penal tax charges, but will not normally trigger a criminal investigation. Fraud is a criminal offence, though.

These scams often work by securing a transfer to a company masquerading as a bona fide pension scheme. Assuming that most people who respond to an invitation will not realise the risk they are taking, TPR has published a leaflet for pension scheme members, which it hopes will be included with every transfer value quotation. There is also an action pack for professionals, highlighting warning signs and what to ask the member who has requested a transfer.

An early check is always on the name of the receiving scheme: it should either be a registered pension scheme, or a Qualifying Recognised Overseas Pension Scheme (QROPS) - many of the malefactors are based outside the UK. HMRC helpfully publishes a list of QROPS, which is updated regularly and affords protection for trustees against penalties such as a scheme sanction charge. There is no way of checking the name of a registered pension scheme, however, because HMRC doesn't provide a list; unlike Companies House, where you can check on the name and the directors of a limited company. (Even if there was a list it wouldn't necessarily be decisive, though, because it is very quick and easy to register a pension scheme online; HMRC operates a 'process now, check later' model. Later could be too late.)

Trustees and providers are also frustrated because TPR doesn't share the information it has about pensions liberators - and nor, it seems at the moment, does anyone else (except perhaps informally, 'off the record'). TPR says it has spent a lot of time discussing this, but without result. The ABI says its members are prevented by "competition law" from pooling information. So if trustees are suspicious about a transfer, but due diligence has revealed no hard evidence which will allow them to deny the member's request, what can they do - apart from delaying payment for up to six months?

TPR's new material directs you to telephone Action Fraud, without explaining who or what Action Fraud is, and without providing any web or postal address either. I tried it out, simply wanting to tip them off about an actual email I had received. The experience was rather dispiriting, as ringing a helpline or call centre often is. When I got to the head of the queue I was asked a very long series of questions, as if I was making a crime report to the police; which is not surprising, because Action Fraud is the UK's national fraud and internet crime reporting centre. Google it, and you discover it does have a website (www.actionfraud.police.uk), and you can make reports online. Questioned why this is not mentioned in its publications, TPR said it assumed everyone would prefer to phone. You might need to set aside twenty minutes for that, and be very patient.

Having done your duty, don't expect any feedback or further contact from Action Fraud: they are explicit about that. This isn't good enough. TPR expects the industry to do what it can to protect members, but we need more engagement from the authorities; more of a two-way flow of information.

New legislation might help, too. Those whose pensions are dissipated are not the only victims of the scammers: arguably the taxpayer has an interest in stopping them, because of the health and social costs associated with supporting the losers afterwards. In my previous article I suggested one way to choke this activity might be via clause 29 of the draft Pensions Bill. When asked about its intentions, TPR clearly had not thought of extending this line of attack beyond enhanced transfer value (ETV) exercises.

Written by Ian Neale, director, Aries Pension & Insurance Systems Ltd

ian@ariespensions.co.uk