In the case of Mr G (PO-21110), the Pensions Ombudsman has upheld a complaint against the administrator and the trustee of a scheme for a delay in providing information requested by a receiving scheme in connection with a transfer value.
In particular, it had taken some time for the transferring scheme administrator to confirm to the receiving scheme that the member's pension fund was not subject to any court orders in connection with divorce or bankruptcy.
On 26 September 2016, the transferring scheme's then administrator sent the member a transfer information pack showing a cash equivalent transfer value of £1,490,918 which was guaranteed until 26 December 2016. The member decided to transfer to a SIPP, and the fully completed transfer forms were sent to the transferring scheme's administrator on 30 November 2016. This was accompanied by a letter detailing information required by the receiving scheme, in particular, "Details of any court orders against the policy, i.e. divorce or bankruptcy". The member subsequently sent the receiving scheme provider some of the documents contained in the transfer information pack. These provided some of the information required by the receiving scheme, but did not include confirmation that there were no court orders regarding divorce or bankruptcy in respect of the member's fund.
A new scheme administrator was appointed to the transferring scheme and received details of the transfer request on 9 December 2016. On 19 December 2016, the receiving scheme's provider informed the transferring scheme's administrator in a telephone call that it required all the information it had asked for in its letter of 30 November 2016.
The transfer payment was received by the receiving scheme on 6 January 2017. On 12 January 2017, the receiving scheme provider informed the transferring scheme administrator that it had not received all the information it needed to invest the monies. On 16 January 2017, the member complained to the transferring scheme administrator about its failure to provide the necessary information which was preventing him from investing the transfer payment. After several telephone and e-mail reminders from both the member and the receiving scheme provider, the transferring scheme administrator sent a letter to the receiving scheme provider on 23 February which answered all its questions and confirmed there were no court orders against the member's fund. The receiving scheme provider received this letter on 27 February 2017 and invested the member's transfer payment in accordance with his instructions on 1 March 2017.
The member subsequently brought an Ombudsman complaint against the transferring scheme trustee, the transferring scheme administrator and the receiving scheme, claiming compensation of over £25,000 for loss of investment return, based on a comparison between the position had his fund been invested in accordance with this instructions on 10 January 2017 and what actually happened. The member calculated that he had missed out on approximately £20,000 in investment returns. The member benefited from fixed protection against the lifetime allowance charge. Under the fixed protection rules, if the member made any further contributions to his pension scheme, he would lose the benefit of fixed protection. Therefore the member calculated that even if he were paid £20,000 in compensation, he would lose out on the tax free growth on that amount for the next 25 years which he would have enjoyed had the £20,000 been held within the scheme. He therefore claimed an additional £5000 to reflect this.
The Ombudsman did not uphold the complaint against the provider of the receiving scheme. Key to the Ombudsman's decision was that the receiving scheme's terms and conditions said, "We will require satisfactory transfer information from the transferring scheme administrator before investments can take place." The Ombudsman held that the receiving scheme was entitled to rely on this condition.
The Ombudsman did uphold the complaint against the transferring scheme administrators and trustee. He said that the scheme administrator ought to have complied with any reasonable request from the receiving scheme to allow it to complete the transfer and investment process for the member in a timely fashion. He rejected the argument that the absence of any mention of court orders should have been treated as confirmation that there were none. If the transferring scheme administrator considered that all necessary information had already been provided, it should have informed the receiving scheme provider of this as soon as possible.
The Ombudsman found the member's calculation of his losses to be credible and ordered the transferring scheme administrator to pay the member £25,522 in compensation. The Ombudsman also ordered the transferring scheme trustee to pay the member £500 for distress and inconvenience.
This determination illustrates that when schemes are dealing with transfer value requests, the Ombudsman will expect them to respond promptly to reasonable requests for information even where there is no specific legal duty requiring them to do so and where the transfer value has already been paid. It appears that the issue in this case arose partly because both the transferring scheme and the receiving scheme had their own standard form transfer documentation which they regarded as "industry standard" and struggled to process information which did not conform to their own standard format. It therefore appears to have taken some time to identify that the only information that the receiving scheme was missing was an express confirmation from the transferring scheme that the member's fund was not subject to a court order.
This case also illustrates the potential for even a relatively short delay in processing a transfer value to lead to substantial losses for the member, particularly where the transfer value involved is large.