The Pensions Ombudsman has rejected a complaint against a trustee that actioned a member's transfer request despite the member having been advised not to transfer. The determination is notable for the Ombudsman's comments regarding the Pension Scams Industry Group's 2015 Code of Good Practice, specifically that this should not be treated as having the same status as a statutory code.
Ombudsman rejects complaint where member transferred against IFA's advice
The Pensions Ombudsman has rejected a complaint against a transferring scheme trustee by a member who transferred out of a defined benefit scheme despite the fact that an independent financial adviser (IFA) had advised against the transfer (Mr H CAS-58624-V3N3). The receiving scheme turned out to be a vehicle for pensions liberation fraud.
The transfer took place in 2016, so well before the introduction of the "red and amber flags" regime in relation to transfers. However, as the transfer involved taking a transfer value of more than £30,000 from a defined benefit scheme to a money purchase scheme, the transfer could not proceed unless the transferring scheme trustee was satisfied that the member had received "appropriate independent advice" from an IFA. The transferring scheme trustee was provided with a copy of the IFA's advice which showed that the IFA had advised against the transfer. The transferring scheme's Pensions Department e-mailed the member to say that it had received a copy of the IFA's advice. The Pensions Department pointed out that the IFA's advice had not recommended the transfer. However, it noted that the member had nevertheless confirmed that he wished to transfer. Minutes later the member replied, thanking the Pensions Department for supporting the transfer.
As part of its due diligence the transferring scheme's Pensions Department checked the receiving scheme's registration which showed that it had been registered since June 2015. It also checked the FCA register for the IFA and the IFA's permissions.
Rejecting the member's complaint, the Ombudsman noted:
- that the transferring scheme had a statutory duty to process the transfer unless there were clear indications of pensions liberation fraud;
- that the Pensions Regulator's 2013 guidance and the Pension Scams Industry Group's 2015 Code of Good Practice on combating pension scams provided an outline of potential warning signs which could suggest pension liberation fraud activity, but that in the case in question there was no indication that the trustee had any reason for concern;
- that the transferring scheme trustee had not proceeded with the transfer until it had confirmation that the member had received appropriate independent advice;
- that whilst the 2015 Code of Good Practice suggested members ought to be asked a number of questions as part of the initial analysis, the code was not a statutory code and trustees were entitled to decide on their own proportionate due diligence processes;
- that he was satisfied that the Pensions Regulator's "Scorpion" leaflet highlighting key warning signs about pension scams would more likely than not have been sent to the member directly.
An unusual feature of this case is that it appears that an IFA advised against the transfer proceeding. The copy of the advice was sent to the transferring scheme's Pensions Department by the IFA. Whilst the Pensions Department referred to the advice in correspondence with the member, the member subsequently claimed not to have seen the advice. If trustees are faced with a member who is apparently requesting a transfer despite having been advised not to transfer, it may be a good idea for trustees to seek specific confirmation from the member that he or she has actually seen the advice if this point is not clear.
It is interesting to note the Ombudsman's comment to the effect that the 2015 Code of Good Practice should not be treated as having the same status as a statutory code.
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