Last year, the Pensions Ombudsman delivered much awaited decisions in relation to suspected ‘pensions liberation transfer’ cases (we have reported on a number of these in a previous edition of Pensions Pieces). One such complaint was brought by a member (Miss Hughes) in relation to the refusal of Royal London, the providers of her personal pension plan, to transfer her benefits to a new small self-administered pension scheme. Royal London refused because it said that it could not satisfy itself that the payment would be used to provide appropriate pension benefits under a registered pension scheme.
The Ombudsman did not uphold this complaint, partly because he found that Miss Hughes did not have a statutory right to transfer her benefits (which Royal London would have been obliged to comply with). This was because for that right to apply she had to be using the transfer value to secure “transfer credits” in the receiving scheme, being rights allowed to her as an ‘earner’. The Ombudsman found that ‘earner’ for this purpose had to mean receiving ‘earnings’ from a receiving scheme employer and as she was not receiving such earnings she did not satisfy the requirements for the statutory transfer right to apply. However, it is this reasoning which has now been rejected by the High Court, instead, finding, on a more general interpretation of the language, that ‘earnings’ for this purpose include those from any source and not just those from a receiving scheme employer. As Miss Hughes was in receipt of earnings from another source and appeared to satisfy all the other necessary conditions, she was found to have a statutory right to transfer her benefits which she was entitled to require Royal London to fulfil.
This case is of particular significance because it is likely there are a number of transfers that may have been blocked by transferring providers/schemes in similar circumstances (and continued to have been blocked following the Ombudsman’s decision in this and other cases last year). Such schemes may, as a result of this case, have been in breach of their obligations to carry out statutory transfers and swift action will need to be taken to address any such cases.
A consequence of this case is that it has widened the scope for pensions scams to be successful, given the now broader circumstances in which members will have a right to take a statutory transfer, which transferring schemes must comply with. There are also issues arising out of the so-called ‘pension freedoms’, which were introduced by the Government with effect from last April, creating many newly wealthy pensioners and opportunities, therefore, for fraudsters to seek to part them from their money.