Since our article on the Pensions Ombudsman's determinations in various suspected pension liberation cases in our April 2015 edition, the Ombudsman has issued five more determinations.

One of the determinations involves a member who was seeking to transfer out of a suspected pension liberation scheme. The other four – which we focus on in this article, as they will be of wider interest – concern members who tried to, or did, transfer to suspected pension liberation schemes.

The determinations remind trustees and providers of the need to ensure that appropriate due diligence is undertaken, on receipt of a transfer request from a member.

Thwarted transfer: determination against provider

In one case, that of Mark Harrison, his attempt to transfer to (what his existing scheme provider was concerned may have been) a pension liberation scheme, was thwarted by his existing provider, Prudential.  However, it is clear from the Ombudsman's determination that Prudential had not undertaken appropriate due diligence, but merely latched on to certain warning signs and considered that to be enough to deny Mr Harrison his proposed transfer.  Prudential made matters worse for themselves by certain failings in the way in which they communicated with Mr Harrison. 

Prudential's main failing was that it appears it did not recognise that Mr Harrison had a contractual right under the terms of his pension plan to transfer the value of it elsewhere, so long as doing so would be a "recognised transfer" for tax purposes.  The Ombudsman determined that there was nothing in the paperwork to suggest that any transfer value paid to the intended receiving scheme would not have been held for the purposes of that scheme, or to represent rights under it, in connection with Mr Harrison becoming a member of it – so, any payment would have constituted a recognised transfer.

Therefore, the Ombudsman directed that, if Mr Harrison still wishes to proceed with a transfer to that scheme, Prudential must provide a transfer value for him and then, on appropriate instructions from Mr Harrison, transfer it to the intended receiving scheme.  The transfer value is to be the higher of what it would have been, at the time when they should have made a payment in respect of Mr Harrison before (July 2013) plus simple interest by reference to the average rate of bank interest from that date to the date of actual payment on the one hand, and a current transfer value for Mr Harrison on the other. 

Transfers made: determinations in favour of providers

In the other cases, however, the providers were treated more generously. 

All three other cases involved members who sought to, and were successful in, transferring their existing pension entitlements to a suspected pension liberation scheme – the Capita Oak Pension Scheme.  Two of the cases involved the pensions of Joseph Winning, one of which was previously provided by Legal & General and the other by Scottish Widows.  The other concerned a pension of Anthony Hughes, which was previously provided by Aviva.

It seems from the determinations that none of the providers engaged in any real due diligence before providing and then paying a transfer value – they simply took the transfer request at face value, as they seemed to be legitimate requests pursuant to legal rights.  Now, it seems that Messrs Winning and Hughes have real concerns over whether they will be able to access their rights under the Capita Oak scheme and if so, what they will be worth.

Critically as far as the Ombudsman was concerned, all of these cases involved requests for transfer payments before the Pensions Regulator issued its updated guidance about pension liberation and the dangers of pension scams in February 2013.  The Ombudsman says, in each determination, "that could be regarded as a point of change in what might be regarded as good industry practice".

In essence, the Ombudsman seems to be saying that the providers concerned acted reasonably, based on (presumably) market practice and expectations at the time, and as such, should not be liable for the mistakes that the members concerned made in making those transfer payments. 

The determinations are brief and generous to the providers.  There is no analysis, for example, as to whether responding to transfer value requests in such a seemingly automatic fashion was actually acceptable, even before the Regulator's guidance issued in 2013. 

Further, there is no reference to the fact that there was a press release and factsheet issued by the Pensions Regulator warning about pensions liberation activity in February 2012 and the FSA also issued warning material at the same time.  

Finally, there is no analysis as to whether there actually was any power or discretion to pay transfer values out of the schemes at issue, in the event that the members did not, in fact, have a statutory right to such a transfer value, and if not, whether a transfer value could properly have been paid anyway, under any separate agreement.

Future determinations

Trustees and providers should be alert to any determinations that may be made, if a complaint is brought against a provider or trustees where a transfer value was requested and paid after February 2013, without appropriate due diligence having been undertaken.  

The Ombudsman did give some indication that, even then, it may not be a foregone conclusion that the providers or trustees will have to provide a remedy.  The Ombudsman says in each of the relevant determinations (with names obviously changed to be appropriate to the determination concerned) that:

"Even if Mr Winning is right that L&G should have carried out greater due diligence (though I do not find that he is) that would not necessarily lead to the reinstating of his benefits with L&G.  It is possible, though I have no need to consider the point, that even if he had been warned that transferring was an unusual and / a risky step, he would have persisted".

Any further determinations will be made by the new Pensions Ombudsman, Anthony Arter, and it will be interesting to see whether Mr Arter takes a line consistent with that of his predecessor, when it comes to such cases.


The new Pensions Ombudsman (Anthony Arter) has marked his arrival by immediately issuing several determinations of his own in relation to complaints concerning suspected pension liberation schemes.  He has, nevertheless, followed the lead of his predecessor in the manner in which the complaints have been analysed and in the decisions reached.

Three of the determinations concern 'completed transfers', in other words, situations where a transfer has been made from a reputable scheme and the member is now regretting it.  One complaint was made against the manager of and administrator of a suspected pension liberation scheme and the two of wider interest were made against the provider of a personal pension scheme – Prudential, in both cases – that made the transfers, allegedly without conducting a proper process;  the Ombudsman disagreed.

These new cases notably concern transfers which took place before the Pensions Regulator issued its updated guidance about pension liberation and the danger of pension scams in February 2013; indeed, the point is reiterated in these new determinations about that being considered to be a point of change in what can be regarded as good industry practice. So, we still wait to see how the new Ombudsman will look upon similar complaints where the transfer was completed after February 2013.

The final determination involves a complaint by a member against Royal London, the provider of the member's personal pension scheme, for failing to fulfil her request to take a transfer.  Mr Arter found that the member did not have a statutory right to take a transfer because the transfer would not have secured "transfer credits" in the receiving scheme because the member was not an "earner", as defined in the relevant legislation, in relation to that scheme. Further, whilst Royal London had a discretion to make a transfer under the scheme rules, the Ombudsman determined that it had legitimate concerns about the proposed transfer, given the information it had received in connection with it and it had, in refusing to make the transfer, exercised its discretion in a way that it was entitled to do.

Providers and trustees will doubtless welcome the consistency of approach, which is unsurprising given the thought that has seemingly gone into the structure, nature and policy of determining complaints in relation to suspected pension liberation schemes by the Ombudsman's office over time.