In a highly significant ruling for the pensions industry, the High Court has held that members do have a statutory right to take a transfer value to a SSAS or other pension scheme even if they do not receive earnings from the SSAS / receiving scheme employer. This is provided that the member at least receives some earnings from another source.
The case was an appeal from a decision of the Pension Ombudsman, who held that Royal London was entitled to refuse to action a transfer request to a one member SSAS on the basis that the nature of the receiving scheme meant the statutory transfer right was not engaged. The PO's reasoning was based on a particular interpretation of the statutory transfer laws, where he "read into" the legislation a requirement for the member to be receiving earnings from the employer of the receiving scheme.
This was a controversial decision because the relevant legislation simply requires that the member must be an "earner", which on the face of it appears to mean earnings from any source. The scheme in question in this case was a one member SSAS with a non-trading principal employer. The PO ruled that because the member did not receive earnings from the scheme's employer, the statutory transfer right did not arise. However in a very clear and authoritative ruling, the High Court has ruled there is no basis for interpreting the legislation in the way that the PO did.
This is a very important case which has implications for all pension schemes and not just SSASs. It means that insurers and other schemes that receive member requests to take statutory transfer values to SSASs or other occupational schemes which have non-trading scheme employers, can no longer refuse to give effect to member transfer rights on the basis that they are not receiving earnings from the scheme employer. The PO's approach has been clearly held to be wrong at law.
Anecdotal evidence suggests that there are a significant number of "blocked transfer" cases, where insurers and other schemes have, until now, refused to action member transfer requests on the basis of the PO's reasoning. Those cases will now need to be urgently reviewed in light of the court's judgment.
Hughes v The Royal London Mutual Insurance Society Limited 19.2.16