The Pensions Ombudsman has issued his determination in four more pensions liberation cases, upholding the basic principle that a statutory or contractual right to transfer will trump other considerations.
Complaint not upheld against provider that made transfer to suspected pensions liberation vehicle (Winning)
Two cases involved two related complaints by a member against the providers of two personal pension schemes that had, at the member's request, made transfers to an apparent occupational pension scheme. In connection with each transfer, the member had signed a discharge form discharging the provider of the transferring scheme from further liability. The receiving scheme had provided paperwork to the transferring scheme providers stating that the scheme was a registered occupational pension scheme, providing the scheme's registration number and confirming that the scheme was willing to accept the transfer value which would be applied to provide benefits consistent with the scheme's registration. After the transfer, the member experienced difficulties making contact with the receiving scheme and became concerned as to what had happened to his pension fund. The member brought a complaint against both the providers claiming that he would not have made the transfer had the provider brought the risks of pensions liberation to his attention.
The Ombudsman dismissed both complaints. He found that there had been no administrative failure on the part of the providers. The member had a statutory right and he could not be deprived of a statutory right by regulatory or other guidance. To the extent that the provider had a duty of care or regulatory responsibilities to the member, they would have been overridden by a statutory obligation to make the transfer.
He noted that the member's transfer request was completed in November 2012. The Pensions Regulator did not issue guidance to providers about pension liberation and the danger of pension scams until February 2013. The Ombudsman said that could be regarded as a point of change in what might be regarded as good industry practice.
Complaint upheld against trustees who refused to act on transfer request (Crossland)
The Ombudsman has upheld a complaint against scheme trustees who did not respond to a member's request to take a transfer value from the scheme. The member had transferred funds totalling approximately £100,000 from two schemes operated by FCA regulated providers to what appeared to be an occupational scheme. However, a number of subsequent attempts by the member to make contact with the receiving scheme trustees, both by telephone and in writing, were met with no response. These included a request by the member to transfer his fund to another named scheme.
The Pensions Ombudsman held that the member's request to take a transfer value fell short of the requirements to exercise a statutory right to a transfer value. The member did not have a copy of the scheme rules so the Ombudsman was unable to consider whether the scheme rules conferred a separate right to a transfer value. However, the Ombudsman held that it was unquestionably maladministration for the scheme trustees not to respond, and it had been the scheme trustees' failure to respond that had stopped the process. He ordered that within 14 days of the member making a transfer value request in accordance with the statutory requirements, requesting a transfer to a named scheme willing to accept the transfer, the scheme trustees should pay the transfer value to that arrangement.
Complaint upheld against pension provider that refused to make transfer when member had contractual right (Harrison)
This case involved a complaint by a member (Mr Harrison) against a pension provider's refusal to make a transfer from the member's personal pension scheme to a small self-administered scheme (SSAS). The provider had refused to make the transfer on the grounds that it suspected the receiving scheme, was a vehicle for pensions liberation. The provider cited the fact that it had received no evidence that the member was an employee or director of the SSAS's sponsoring employer, nor had it been able to establish the scheme administrator's credentials. Both the SSAS's and the scheme administrator were relatively newly established.
The member stated that the SSAS had been established by one of his friends, primarily for the friend's own benefit. However Mr Harrison had been invited to join and wished to do so in order to take advantage of the investment opportunities permitted by the SSAS.
The Ombudsman held that the member did not have a statutory right to a transfer value because he was not an "earner" by reference to the receiving scheme's sponsoring employer. However, the scheme rules of the personal pension scheme gave him an absolute right to transfer to another registered pension scheme. The evidence was that the SSAS was a registered pension scheme, so the provider should have made the transfer in accordance with Mr Harrison's contractual right. Given that the scheme rules stated that Mr Harrison had a right to make a transfer, if the provider alleged that he had no such right, the burden of proof lay with the provider to explain why not.
The Ombudsman ordered the provider to pay a transfer value equal to the higher of the transfer value at date of payment and the transfer value as at 31 July 2013 (plus interest) being the date by which the provider should have actioned the transfer.
These latest cases clearly demonstrate that where a scheme is requested to make a transfer it must establish whether the member has a legal right to a transfer, either under legislation or under the scheme's rules. Scheme trustees must act in accordance with a member's legal rights and concerns about pensions liberation concerns do not justify refusing to make a transfer to which a member has a legal right. The Harrison determination illustrates that refusing to make a transfer where pensions liberation is suspected is not a risk free option, as a transferring scheme may be ordered to pay the higher of the transfer value at actual date of transfer and the transfer value as at the date it should have been paid (plus interest).
Whilst the complaint was not upheld against the providers who did make the transfer in the Winning case, there is a clear indication that the Ombudsman is likely to expect trustees who have made transfers more recently, in particular since February 2013 when the Pensions Regulator issued its guidance, to have given warnings about pensions liberation in appropriate cases.