On Friday the High Court usefully clarified one of the technical conditions (that of being "an earner") for a member to have a statutory right to transfer to an occupational pension scheme (OPS).
It has been hoped the court would provide guidance on the difficult issue of exercising a discretionary power to transfer where there is no statutory right. But, in the event, this question did not come up because the court decided the member had a statutory transfer right after all.
Ms Hughes appealed to the court after the Pensions Ombudsman (PO) decided:
- she did not have a statutory right to transfer out of the Royal London (RL) personal pension scheme to a given OPS and
- RL had been justified in refusing to exercise its discretion to transfer because of its concerns about the nature of the receiving scheme against the background of pension liberation.
To have a statutory transfer right to an OPS, a member needs to receive "transfer credits", defined by legislation as rights "allowed to an earner". The PO decided this meant being an earner in relation to an employer sponsoring the receiving scheme. But, on the facts, he found Ms Hughes had no earnings from a scheme-related employer. So she was not "an earner" and had no statutory transfer right.
However, the court disagreed and found she was "an earner" as the term is widely defined in the legislation and so had a statutory right to the transfer she had requested.
Pensions scams are a significant issue for members, trustees and providers. As of last autumn, one in seven new complaints to the PO involved suspected scams. The PO accepts a balance must be struck between members’ transfer rights and trustees’ and providers' concerns about liberation.
This case reduces the scope to refuse a transfer on technical legal grounds (though many others remain). On the plus side, it also removes one line of possible challenge from a member who later regrets their decision to transfer.
In similar cases trustees and providers will continue to be in the difficult position of having a legal duty to make a transfer in circumstances where they have concerns about the nature of the receiving arrangement and whether it is in the member's best interests to make the transfer.