Trustees entitled to require legal opinions before making transfer to QROPS

The Deputy Pensions Ombudsman (DPO) has held that scheme trustees were entitled to require a member to provide two legal opinions, one covering English law and one covering the law of the jurisdiction in which the receiving scheme was based, before making a transfer to a “qualifying recognised overseas pension scheme” (QROPS) (CAS-83019-G2S0).

The member wished to exercise her statutory right to take a cash equivalent transfer value to a scheme based in Malta which she believed to be a QROPS.  Before making the transfer, the trustees of the UK scheme required the member to provide two legal opinions, one from a law firm qualified to advise on English law, and one from a law firm qualified to advise on Maltese law, confirming that the receiving scheme met the requirements to be a QROPS.  The member brought a complaint against the trustees of the UK occupational scheme regarding their refusal to make the transfer unless the member provided the two legal opinions requested.

The DPO found that it was reasonable for the trustees to require the legal opinions requested, and to require the member to obtain these at her own cost.  She noted that determining whether a scheme is a QROPS is not straightforward.  Whilst HMRC maintains a list of schemes which have notified that they are “recognised overseas pension schemes”, the list does not amount to confirmation by HMRC that the schemes are actually QROPS, and HMRC can remove schemes from the list retrospectively.  The DPO noted that the conditions for qualifying as a QROPS cover how the scheme is regulated in its country of establishment and its tax treatment.  She said that these were matters on which the transferring scheme trustees were required to satisfy themselves, but were not reasonably matters within the expertise or responsibility of the UK scheme trustees.  

Our thoughts

A member with a right to a cash equivalent transfer value has a statutory right to transfer to a QROPS, but establishing whether an overseas scheme meets the requirements for a QROPS is not straightforward, and the legislation does not prescribe what evidence the trustees should require.  This determination is likely to be a welcome development for UK scheme trustees.