In Hughes v The Royal London Mutual Insurance Society Limited the scheme provider had refused a request by a member to transfer her personal pension to a small self-administered scheme. The provider had absolute discretion under the rules as to whether to agree to a transfer and had refused because of concerns that the SSAS might be a pension liberation scheme. It was a single member scheme with a non-trading employer and had been registered with HMRC only very recently.
The member argued she had a statutory right to a transfer and complained to the Pensions Ombudsman. The Ombudsman decided that she did not have a statutory right because the transfer would not meet one of the technical requirements – she was not an "earner", as she had no earnings from the receiving scheme's employer. As a result, given the concerns it had that there might be a pension liberation scam, the administrator could exercise its discretion to refuse to make a transfer.
The High Court disagreed completely. The member was an "earner" because she had earnings from other sources and it was not open to the Ombudsman to read words into the statutory definition to require those earnings to be from an employer in the receiving scheme.
Comment & Actions
- The Pensions Ombudsman (which says it has around 200 live cases affected by the ruling) has announced that, subject to verification of earnings and the provision of risk warnings, and assuming the other requirements for a statutory transfer right are made out, trustees and administrators cannot refuse a transfer – even if they have significant concerns that it may be for the purposes of pension liberation.
- This decision will clearly impact on trustees' reaction to requests in the future – their hands are tied if the statutory requirements are met. But it is still the case that there is a responsibility on trustees not to respond blindly to a member's request to transfer out and the Pensions Regulator has made it clear in the past that it expects trustees to take active steps to protect members from pension liberation fraud.
- The upside of this decision is that a member who has second thoughts about a transfer that has been allowed to go through because the member has a statutory right presumably cannot turn round later and say that consent shouldn't have been given.