Hot on the heels of the industry-wide Code of Good Practice on pension scams, the Pensions Ombudsman has issued his latest determinations on so-called pension liberation. These reinforce the obligation on pension schemes to comply with a member’s right to a transfer (whether under legislation or scheme rules) and also reject a complaint by a member after such a transfer took place, noting that the pension scheme had complied with industry practice when making the transfer.
Mr Winning – complaint that transfer made
Two of the new determinations – both of which relate to the same member, Mr Winning - are the first in which the Ombudsman has ruled on a member complaint that a transfer to an alleged liberation arrangement should not have been made.
The member had transferred over £50,000 from two personal pension plans to the “Capita Oak” pension scheme. However, he had since been unable to contact his new scheme. He complained to the Ombudsman, saying that the pension providers should not have allowed him to transfer in the first place.
The Ombudsman rejected the complaint. The transfer application had appeared to comply with all statutory requirements. A member could not be deprived of a statutory right to transfer and to the extent that each provider had a duty of care to the member, it was overridden by their legal obligation to make the transfer.
In considering whether there had been maladministration, the Ombudsman said that he also needed to look at whether the providers had acted consistently with good industry practice. The transfers took place in late 2012, but the Pensions Regulator did not issue guidance about pension liberation until February 2013, guidance which “could be regarded as a point of change in what might be regarded as good industry practice”. Present standards of good practice could not be applied to the providers’ past actions.
Even if the providers should have carried out greater due diligence, that would not necessarily lead to the reinstatement of the member’s benefits: it was quite possible that he would still have proceeded with the transfer in any case.
Mr Harrison - complaint that transfer blocked
In January, the Ombudsman issued his first determinations about members who complained that they had not been allowed to transfer to suspected liberation schemes. He held on the facts that the pension providers against whom those claims were brought had properly refused the transfers (on the grounds that the status of the receiving schemes did not satisfy the formal requirements that would give the members a statutory right to transfer benefits to them).
The third determination issued by the Ombudsman this week concerned a member, Mr Harrison, who – like the earlier complainants – complained that his personal pension provider had blocked his attempt to transfer. In this case, the member’s right to transfer was contractual, rather than statutory. Nevertheless, the Ombudsman reiterated that a member with a right to transfer (whether statutory or contractual) should not be denied it. In this case the contractual conditions were met, and so the Ombudsman ordered the provider to make the transfer, if the member still wanted it.
What does this all mean for trustees?
Although the new cases again concerned transfers from personal pension providers, the principles are relevant to trustees of occupational schemes who might be faced with similar complaints. They underline that a member’s legal right outweighs trustee or provider suspicions of liberation activity.
The Ombudsman’s focus on the apparent sea-change in good industry practice in February 2013 means that the Winning determinations are most relevant to transfers made before that date. However, the wider reasoning suggests that where trustees have followed best practice regulatory guidance, as well as the law, the Ombudsman is unlikely to hold them guilty of maladministration for letting a transfer take place.
The Harrison case, on the other hand, should leave trustees in no doubt that they may be in breach of their legal duties where, on suspected liberation grounds, they do not allow a member to exercise an otherwise enforceable right to transfer out.