The High Court has ruled against insurer Royal London for blocking a pension transfer to a suspected pension liberation scheme. Royal London had refused the request because it did not agree that the member in question had a statutory right to transfer and it was not satisfied about the status of the receiving scheme. Overruling the Ombudsman’s determination, the High Court held that the member was an “earner” even though such earnings were not received from the employer sponsoring the receiving scheme.

Pension liberation involves the unauthorised use of pension monies, typically in situations when a member of a registered pension scheme is offered the opportunity to access pension monies before their normal minimum pension age or unrealistically high investment returns. Many pension liberation schemes are set up ostensibly as occupational pension schemes that are registered with HMRC and at first sight do not involve any illegality. However, they often breach HMRC tax rules regarding unauthorised payments or loans, leading to adverse tax consequences for the member.

There is some concern that this ruling will make it more difficult to prevent liberation scams. Although trustees and providers may appreciate the certainty which results from the ruling, they should still carry out thorough due diligence on receiving schemes when transfer requests come in. If there are suspicions, they should flag their concerns and send appropriate warnings and literature to the member.