The Pensions Ombudsman has published its first determination in relation to pensions liberation and has directed the trustees of the liberation scheme in question to repay a transfer value of at least the original amount plus interest. This speedbrief looks at the Ombudsman’s decision and its implications for clients who find themselves involved with pensions liberation schemes.

Background

For a summary of pensions liberation fraud, please see our previous speedbrief here.

An active member of the NHS Scotland Pension Scheme (Mr X) opted out of that scheme and transferred the whole of his pension to the Capita Oak Pension Scheme (the Scheme). The Scheme has recently been the subject of extensive media coverage.

Mr X had been induced by a promised 8-12% return on his investment and, in March 2013, the sum of £367,601.81 was transferred to the Scheme. The Ombudsman did not comment on the transfer to the liberation fund.

Following the transfer (and amid concerns in relation to the legitimacy of the Scheme), Mr X sought to transfer out of the Scheme. Mr X and his financial adviser made numerous attempts to contact the manager of the Scheme, Imperial Trustee Services Limited (Imperial). Despite several attempts to contact Imperial, in writing and by phone, Mr X did not receive a response in relation to his request to facilitate a transfer.

What did the Ombudsman decide?

The Ombudsman considered whether Mr X had a legal right to transfer out of the Scheme. Mr X did not have copies of the Scheme’s governing documents and investigators were not able to obtain them from Imperial. Therefore, the Ombudsman considered whether Mr X had a statutory right to transfer out. It was noted that, strictly, Mr X’s request to transfer did not meet the required test. However, its failure was based on the Scheme’s maladministration and failure to respond to his requests. Had he not been ignored, Mr X would have made a full transfer request and therefore obtained a statutory right to payment.

The Ombudsman directed that within 14 days of Mr X requesting a transfer value to a named scheme that is prepared to accept it, Imperial is to provide Mr X with a cash equivalent transfer value - the transfer value being the higher of:

  • the cash equivalent transfer value as at 30 September 2013, plus simple interest; and
  • the correctly calculated cash equivalent transfer value at the date of payment.

It was held that Mr X could enforce the direction against Imperial through the Courts. However, it was noted that even though enforcement was possible in theory, it may be that a large proportion of the money invested was already missing.

Comment

Since the Ombudsman specifically chose not to comment on the circumstances that led to the transfer into the Scheme, the decision is perhaps of little direct value at this stage.   There is also a question over whether the Ombudsman would take the same approach if the transfer request had been made to a scheme where there was no concern over that scheme’s legitimacy, but rather the trustees of the transferring scheme had concerns about whether the funds were going to be sent to an illegitimate vehicle.

However, it is evidence that the Ombudsman is starting to make positive progress in its promised review of pensions liberation cases. Further, it has announced that it will publish a group of cases about people who wanted to transfer out, but whose transfers have been “blocked” by their pension schemes. This is likely to be of more relevance to those who find themselves involved in attempted pensions liberation. The list is expected to be published in the week commencing 5 January 2015 and a further update will follow that.