The insurer said it had seen a rise in the number of suspicious transfer requests and is actively blocking applications where necessary.

By the year end, Aviva expects to have stopped about 600 UK cases with a value of approximately £14m, which suggests that the combined insurance industry may be stopping £150m.

Aviva head of pension policy John Lawson briefed MPs on the issue in Parliament this week.

He said: “Action needs to be taken now to stop pension liberation ‘at source’ rather than at the point where providers are being inundated with transfer requests from customers who mostly don’t understand how much money they stand to lose.

“The HMRC’s decision to operate a more robust new scheme registration process, involving individual vetting of all applications for registration, is a step in the right direction. However, more needs to be done.

“Fraudsters are not going to stop when they see an opportunity, so it’s essential that we make it impossible for them to operate.”

Liberation fraud can result in tax charges of 55% while fees of between 10% to 15% will also hit pension pots. Consumers can end up losing 70% or more, Aviva warned.

Lawson (pictured) said there should be a more rigorous registration process for trust-based schemes. HM Revenue & Customs tightened rules on registration earlier this month but Lawson said a set-up fee of £5,000 would help halt bogus schemes being established.

He also said all trust-based schemes should be required to appoint an independent trustee, who is registered to act in this capacity by The Pensions Regulator.

“This would restore the pre-2006 position applying to small self-administered schemes (SSAS), where an independent professional trustee was required to prevent scheme assets being misappropriated.”

The rules on unauthorised payments should also be tightened to ensure that they are not used beyond their original purpose, added Lawson.
Unauthorised payments are allowed within Finance Act 2004, but were intended to cope with administrative anomalies.

Aviva also suggested providers should be able to delay transfers indefinitely on condition that they have reasonable grounds and that these are reported to government agencies and an appeal system could be established through the Pensions Ombudsman Service.

Overseas transfers should also be tightened up, the firm said, by only allowing transfers to non-European Union (EU) countries where the person can prove that they are now tax resident in that country.

And within the EU, policymakers should explore a temporary agreement via the European Commission/EIOPA with a view to legislating in the longer-term.