The Pensions Ombudsman has published three long-awaited determinations on pension liberation, together with a wider statement on the topic. For the first time, trustees and administrators now have concrete guidance as to his approach to this sensitive issue. 

The legal background

Over recent years increasing numbers of pension scheme members have requested transfers to pension liberation arrangements (typically marketed as allowing members to convert pension benefits into cash). A high-profile Pensions Regulator campaign explains the risks of such liberation scams and how trustees of potential transferring schemes can spot them. 

However, a member who meets certain conditions has a statutory legal right to a transfer payment. This means that if trustees are satisfied that the receiving scheme is an occupational or personal pension scheme, registered with HMRC, they must generally make the transfer payment even if they suspect liberation is involved.  This puts trustees in an invidious position.

The cases

The determinations concerned members who had been denied a transfer to purported “occupational pension schemes” on the grounds that they were in fact liberation vehicles. All three involved requests to transfer out of personal pension schemes. However, the principles outlined apply equally to occupational scheme trustees.

The Ombudsman’s starting point was to ask whether the members had a legal right to the transfer they had asked for. On the facts, he found that the proposed transfers did not meet the precise statutory requirements and so the providers were justified in not allowing transfer. However, the Ombudsman criticised them for not having actually carried out the analysis to establish whether there was a statutory right, having relied instead on comments from relevant regulators and a general hostility to liberation activity. 

Trustees’ process

The test the Ombudsman lays down is that where there is a risk of liberation activity, trustees and providers “should satisfy themselves of the position, on the balance of probabilities and a correct interpretation of the law, based on such evidence as they can obtain from the member or receiving scheme or other sources - and reaching a decision may include drawing inferences from a failure to provide evidence. Where they find that there is no right to transfer they should be expected to be able to justify that to the person asserting the right.”

In each case, the Ombudsman noted that it was for the pension provider to satisfy itself that a member did not have a right to transfer. The burden of proof should not lie with the member. 

Although suspicions of liberation may justify delay (e.g. for the asking of relevant questions), the Ombudsman is clear that a transfer can only be withheld completely if there is no legal right to it. Where there is such a right, suspicion alone does not justify failure to pay: “if the transferors had had a statutory right that they were determined to enforce, even in the face of severe warnings, then, after the providers had made such enquiries as thought necessary to establish whether the right existed, the providers could not have further resisted payment.”  

The Ombudsman’s view of the balance between members’ rights and the responsibilities of the personal pension scheme operator was clear:  “In the end, though, once [the Insurer] had followed all the relevant steps, the individual’s right to make what might be a life-changing mistake must take supremacy over [the Insurer’s] obligation to help them not to.”


These detailed and reasoned determinations will be welcomed by trustees, even if many will wish they had not been so long in coming. In them, the Ombudsman acknowledges the “highly unenviable position” of trustees, and the individual cases show that establishing a right to transfer may not be straightforward, and can turn on difficult legal and factual analysis.

So, trustees should be in no doubt that they are expected to do appropriate due diligence in relation to suspected liberation cases. Nevertheless, if, having done so, they cannot establish a reason why there is no right to transfer, their duty is to make payment.

The Ombudsman’s statement, with links to the relevant determinations, can be found here.