Many of you are already well aware of my lengthy battle for the fair treatment of pension scam victims, especially those who fell victim in the early days of scams when there was little knowledge of the signs...

Some of our customers were persuaded by FCA registered advisers to transfer their pensions to schemes set up solely so that trustees, managers and promoters could get access to people’s money. HMRC and government have taken the (astonishing) stance that scheme members who transferred their pensions must have colluded with the scammers and are therefore to blame for what happened. As a result, they are being penalised for breaking the rules with a hefty tax charge of either 40% or 55% on unauthorised payments - It has taken HMRC over a decade to work out the exact amounts owed, largely due to poor records kept by the scam schemes. However, no time was wasted in issuing a protective (provisional) claim against those members. Not only did HMRC estimate what might be owing, they also added interest at about 8% each year on the provisional amount as long as it remains in dispute. Over more than a decade, this interest can effectively double the amount demanded.

For a long time, I thought that HMRC simply didn’t understand that third party fraud meant the fraudsters were the guilty party, and that the members, often left penniless, were victims… I thought if I could only explain scams and fraud and victimhood there would be a Eureka moment, and a change in behaviour. Sadly, this has not been my experience. I have spent countless days, weeks and months explaining so I can now only assume they simply don’t care and are determined to apply the law to the fullest extent possible on the victims. They have not pursued the perpetrators of the fraud and in some ways, it could be argued that they have encouraged them to continue offending by allowing them to register schemes without checking how they were really being used. Worse still they seem to have spent all their efforts (and our taxes) in the pursuit of vulnerable people.

The summer election caused a brief halt in the tax collection activities, but they have commenced again and HMRC have now been able to calculate what they now believe those victims owe them in back tax.

It gets even worse. HMRC is interpreting the law in the most advantageous way for themselves. Where the schemes were set up to offer money by way of a reciprocal loan scheme, HMRC have decided they will charge victims 55% on both the giving and the receiving of a loan, essentially doubling the tax burden. This is awful but it is permissible under the law. The title of this blog pays tribute to Charles Dickens who observed the same attitudes in Victorian times!

HMRC will only allow victims time-to-pay i.e. in instalments - but refuses to reduce the tax rate, despite having the power to do so. This is especially galling as we've all seen the preferential treatment given to influential individuals through "sweetheart" deals, but for the victims of pension scams, there is no such flexibility.

Most of the victims now face a bleak future. Having reached or surpassed normal retirement age, they have no chance to "re-earn" their pension savings, which were lost to scammers. To make matters worse, they still face hefty tax charges. Would you be okay with this if it happened to your mum or dad because they trusted a smooth-talking financial adviser?

HMRC have started to issue the first of the notices and the first tranche. The first 100 (approx.) of the 1000 victims have now been informed that they owe no tax after all as they were not involved in any unauthorised activity. This is the message they’ve been trying to tell HMRC for over a decade, but during that time they’ve faced annual demands for tax and interest. One victim was so overwhelmed he burst into tears, expressing his anger about how his wife had suffered over the years. Whilst they are finally free from the sword of Damocles hanging over them, the years of stress and mistreatment have taken their toll. And there has been no apology from HMRC.

Now the remaining 900 await their fate over the next few months. There will be no happy ending for these victims unless we can change the law, and time is running out.

PSIG recently launched a petition to rally support for a change in tax law to stop HMRC levying huge tax bills on people who’ve been defrauded of their pension savings. We are, frankly, more than a little disappointed with the level of support so far, and we kindly ask all of you lovely people in the pensions community who haven’t signed it to do so now. Your signature could make a significant difference to the lives of a few hundred of our former customers.

Please help and ask your colleagues to sign too. We can do this! Sign the petition here.

Margaret Snowdon OBE, Chair - PSIG