(2 min read)
A recent Pensions Ombudsman decision regarding a transfer value paid in 2014 will be of interest to trustees of occupational pension schemes. The Ombudsman found that the trustees were under no obligation to provide members with a copy of the Pensions Regulator’s “Scorpion” warning leaflet or to follow the steps in the Regulator’s pension liberation fraud action pack. The decision suggests that when considering past transfer values the current Ombudsman will make a clear distinction between (a) legal obligations and (b) good practice as suggested in regulatory guidance that is not legally binding.
In a recent determination (CAS-81940-Z2S8) involving a transfer value paid in 2014, the Ombudsman found that there was no statutory or regulatory obligation on the trustees of an occupational pension scheme to provide members with a copy of the Pensions Regulator’s “Scorpion” warning leaflet nor to follow the steps in the Pensions Regulator’s pension liberation fraud action pack (the Action Pack). The Ombudsman also considered whether trustees who received a statutory transfer value request had a broader duty of care to carry out due diligence beyond that necessary to establish that the member had a statutory right to a transfer value. The Ombudsman concluded that there is no such general duty, noting that such a duty could potentially conflict with trustees’ statutory duties to pay transfer values in accordance with the timescales specified in legislation.
The Ombudsman said that whilst there was no general duty of care requiring trustees to carry out due diligence in relation to the transfer, a duty could arise if the trustees voluntarily assumed a duty. However, that would only be the case if the member had reasonably relied on the transferring trustees and this was reasonably foreseeable to them. In the case before him, the Ombudsman did not consider that the trustee had voluntarily assumed responsibility to carry out the due diligence suggested in the Regulator’s Action Pack.
The Ombudsman noted that the legal position could be different in a case where the member has no statutory right to a transfer value. In such cases the scheme’s rules will be of particular importance. He also noted that the legal position could be different in a case where a member requests a transfer value from a personal pension scheme, as in such cases the operator of the personal pension scheme would need to comply with the FCA Handbook which imposes its own regulatory obligations.
Our thoughts
The case in question relates to a transfer made in 2014. Since then there have been significant changes to the legislation governing transfer values, including the introduction in 2021 of a requirement for trustees to consider whether “red flags” or “amber flags” are present, with a red flag being a bar to the transfer and an amber flag meaning that a transfer can only proceed after a member has taken scams guidance. However, trustees can still face complaints relating to past transfers where, as in this case, members lose their entire pension fund following a transfer to an arrangement which turns out to involve a high risk investment or outright scam.
Past Ombudsman determinations in relation transfer values have attached considerable importance to the question of whether the transfer took place after publication of the Regulator’s Scorpion warning leaflet and, if so, whether the leaflet was issued to the member. This determination focuses strictly on the legal position, noting that the Scorpion leaflet and Regulator’s Action Pack had no legal standing and as such should not be taken to impose additional obligations on trustees.
