The Pensions Ombudsman has dismissed a complaint from a member who lost her pension fund after a scheme trustee proceeded with a transfer despite concerns that the receiving scheme might be a vehicle for pension liberation. The case concerned a transfer in 2014. There have been significant changes to the law since then, but this case will be of interest to schemes facing complaints relating to transfers around that time.
Ombudsman dismisses member complaint despite Trustee's pension liberation concerns
The Pensions Ombudsman has dismissed a complaint from a member who lost her pension fund after a scheme trustee proceeded with a transfer despite concerns that the receiving scheme might be a vehicle for pension liberation (Ms T (CAS-37159-M4B6).
Events leading up to the transfer
The relevant transfer was made in April 2014. The Pensions Regulator (TPR) had launched an awareness campaign about pension liberation, including publication of its "Scorpion" leaflet, on 14 February 2013. The receiving scheme's trustee stated that it was an occupational arrangement, that Ms T was not an employee of the sponsoring employer, but that the receiving scheme trustee had accepted her as a non-employee member of the scheme. The transferring scheme trustee discussed Ms T's transfer value request and decided that advice should be sought from its legal counsel.
The legal counsel noted that Ms T was not employed by or linked to any company associated with the receiving scheme, so that trustee should ensure it followed TPR's updated guidance, but also advised that a transfer could not be unreasonably delayed. Approximately one month later, the trustee decided that, despite some reservations, the transfer of Ms T's benefits should proceed if Ms T still wished to transfer. However, the transfer could not proceed until confirmation had been received that the receiving scheme was registered with HMRC. On the same day the scheme administrator wrote to HMRC requesting confirmation that the proposed receiving scheme was a legitimate pension arrangement.
Approximately five months after receipt of the transfer value request, the trustee of the transferring scheme submitted an application to TPR for an extension of the statutory deadline, as it appeared unlikely that the transfer would be completed within 6 months of the guarantee date of the cash equivalent transfer value. In support of the extension application, the receiving scheme explained that it had reason to believe the receiving scheme could possibly be connected with pension liberation activity. Around the same time, the scheme administrator telephoned Ms T to discuss the transfer. According to the telephone note of that conversation, the scheme administrator asked Ms T whether she still wished to proceed with the transfer, and Ms T confirmed that she did. The administrator did not ask Ms T whether she was aware of pension liberation. However, the Scorpion leaflet and pensions liberation information were sent to Ms T again.
On the same day as the telephone call, the scheme administrator e-mailed Ms T saying that the trustee was required to administer the transfer in accordance with TPR's updated guidance. There would therefore be a delay in the transfer while the trustee sought confirmation from HMRC regarding the receiving scheme's registration status. The e-mail also informed Ms T that she was eligible to claim her scheme benefits any time from age 55 and that her yearly pension was £1,061.59. The e-mail advised that signs of pension liberation scams were pension loans or cash incentives. The e-mail said that Ms T should read the enclosed Scorpion leaflet and pensions liberation information before making a definitive decision about the transfer.
The scheme administrator telephoned the Action Fraud helpline, in accordance with TPR's updated guidance, about Ms T's transfer. The Action Fraud representative explained that if TPR was aware that the receiving scheme was connected with liberation activity, the scheme administrator should contact Action Fraud again. Action Fraud would then provide a fraud reference number and contact Ms T to inform her that the proposed receiving scheme was a potential scam vehicle.
In January 2014, Ms T e-mailed the scheme administrator and said that she wished to proceed with the transfer. Ms T was sent a transfer form which she completed. This included an acknowledgement that she had read TPR's leaflet on pension liberation, and also that the trustee could delay the transfer until it had received confirmation from HMRC that the receiving scheme was registered and that HMRC did not have reason to believe it was a pension liberation vehicle. On learning that the transfer payment had been made, TPR did not consider the extension application further.
In March 2014, HMRC sent the scheme administrator confirmation that the proposed receiving scheme was a registered pension scheme. The transfer value was paid in April 2014.
The Ombudsman did not uphold Ms T's complaint. He considered it "unfortunate" that the scheme administrator had not referred directly to pension liberation scams in its telephone call with Ms T, but noted that Ms T had twice been provided with the Scorpion leaflet. The Ombudsman found, on the balance of probability, that given the information Ms T had received, Ms T would have been unlikely to cancel the transfer even if pension liberation scams had been directly discussed.
The Ombudsman noted that Ms T did not recall reading the Scorpion leaflet, but said he could see no reason why Ms T would not review the materials she was provided with in connection with her own transfer. He noted that Ms T had signed and returned the transfer form indicating that she had read and understood the Scorpion leaflet. The Ombudsman also noted that Ms T had not made the transferring scheme trustee or its administrator aware of the fact that she had been contacted by the receiving scheme via a cold call, despite the Scorpion leaflet identifying this as a warning sign. The Ombudsman considered that the transfer form and Scorpion leaflet provided sufficient information to allow Ms T to carefully consider her decision to transfer to the receiving scheme, and that the transferring scheme's trustee could not be held responsible for Ms T's decision.
This decision will be a welcome one for trustees facing complaints from former members who took transfers to schemes that turned out to be pension liberation vehicles. However, the determination starkly highlights the lack of protection for members at the time the transfer was made. We think it would come as a surprise to many members that a scheme trustee or administrator might be sufficiently concerned about pension fraud to contact Action Fraud about a prospective transfer, yet not spell out its concerns to the member.