The Pension Ombudsman has issued a further five determinations in respect of pension liberation. The first concerns a member trying to transfer out of a pension liberation scheme. The second, third and fourth determinations consider the responsibility of original pension providers when progressing a transfer and the last involves a proposed transfer, blocked by insurers because they believed that the transfer would be to a liberation scheme.
Please see our previous update for a brief explanation of pension liberation schemes and earlier determinations.
Henley Retirement Benefit Scheme – Mr Crossland
Mr Crossland transferred his pension, in search of high investment returns, to a pension liberation scheme, the Henley Retirement Benefit Scheme ("Henley Scheme"). Following the transfer and confusing correspondence from Omni, the Henley Scheme Administrator, Mr Crossland had concerns that his assets were no longer secure and wished to transfer out of the Henley Scheme. On 3 March 2014 Mr Crossland wrote to Omni to relay his concerns and request a cash equivalent transfer value ("CETV"). Mr Crossland received no reply and made numerous, unsuccessful, attempts at contacting Omni.
On 3 June 2014, Mr Crossland again made a transfer request and, this time, specifically stated that he wished to transfer from the Henley Scheme to the Genwick Retirement Benefits Scheme, an occupational pension scheme. Mr Crossland received a reply from Omni on 18 June 2014 confirming that he was eligible for payment for a transfer value, subject to a valid, written request. No further action was taken by Omni and Mr Crossland failed to receive any further correspondence. Consequently, Mr Crossland brought a complaint to the Pensions Ombudsman with a view to accelerating a transfer.
The Pensions Ombudsman confirmed that regardless of a scheme's transfer provisions, if members' enjoy a statutory right to transfer, they cannot be deprived of that right.
The Pensions Ombudsman, therefore, needed to determine whether Mr Crossland's requests for a CETV was a qualified application that entitled him to a statutory right.
The Pensions Ombudsman concluded that both Mr Crossland's requests fell short of the legal requirements. His first request failed to include the requirement that Omni use the CETV to acquire credits in an occupational or personal pension scheme the trustees or managers of which were able and willing to accept payment. Mr Crossland's later request also failed to meet the requirements for a statutory transfer right.
However, the Pensions Ombudsman stated that it was the lack of response from Omni that prevented a transfer from taking place, as further correspondence between Omni and Mr Crossland could have corrected any shortfalls and provided Mr Crossland with a statutory right to transfer.
The Pensions Ombudsman ordered that Omni must, within 14 days of Mr Crossland's adequate request to transfer, pay the transfer value in line with the arrangement.
Capita Oak Pension Scheme – Mr Winning
Mr Winning transferred his pension from Scottish Widows to a pension liberation scheme, the Capita Oak Scheme, and was now unable to trace his pension fund. Mr Winning claimed that he would not have transferred his pension fund had Scottish Widows made him aware of the dangers of pension liberation scams, and consequently, wanted Scottish Widows to pay him the transfer value as redress.
Mr Winning brought an identical complaint against Legal & General (L&G), where he held additional pension funds.
First, the Pensions Ombudsman considered the validity of Mr Winning's transfer requests. The Capita Oak Scheme was registered with HMRC, purported to be an occupational pension scheme and confirmed it would accept the transfer and provide benefits consistent with the scheme registration with HMRC. The Pensions Ombudsman concluded that Mr Winning's transfer applications complied with legal requirements, granting him the statutory right to transfer on 21 November 2012.
It was not until February 2013 that the Pensions Regulator issued guidance to providers about the risk of pension liberation scams and this date could be regarded as a point of change in what might be viewed as good industry practice.
The Pensions Ombudsman confirmed whilst Scottish Widows and L&G owed Mr Winning a duty of care, this duty would have been overridden by his statutory right to transfer.
In any event, even if Scottish Widows or L&G had warned Mr Winning of the potential risk of pension liberation scams, there is every possibility he would have continued with the transfer. Mr Winning admitted that the main reason he transferred was that Capita Oak Scheme was registered with HMRC, which led him to believe it was legitimate.
Whilst the Pensions Ombudsman had sympathy with Mr Winning, there was nothing to suggest an administrative failure by Scottish Widows or L&G and neither of his complaints were upheld.
Capita Oak Pension Scheme – Mr Hughes
Mr Hughes found himself in a similar situation to Mr Winning, described above; the difference being timing. Mr Hughes's transfer took place simultaneously to the Pensions Regulator's guidance on pension liberation scams being issued. Mr Hughes has transferred his pension from Aviva to the Capita Oak Scheme, and also was now unable to trace his pension fund. Mr Hughes sought redress from Aviva, as he alleged that they failed to provide him with sufficient information and failed to undertake the necessary checks on Capita Oak Scheme.
Mr Hughes held pension funds with Aviva and Countrywide Assured. On 11 January 2013 Mr Hughes contacted Aviva and made a, valid, request to transfer his pension to the Capita Oak Scheme. Aviva proceeded with the transfer on 19 March 2013.
The Pensions Regulator issued guidance to pension providers about the dangers of pension liberation scams in February 2013. Mr Hughes claimed, therefore, that Aviva failed to pass on the necessary and adequate information about pension liberation scams as advised by the Pensions Regulator.
However, Mr Hughes first made his transfer request to Aviva in January 2013, a month prior to any published guidance, meaning the "Scorpion Leaflet", now sent to members who request transfers and warning them of scams was not in existence at the time of his request. In addition, the Pensions Ombudsman accepts that it is reasonable to expect it to take providers "some time" before procedures and literature would be updated. The Ombudsman continued by stating that the fact Aviva had not amended its procedures by March 2013 did not constitute maladministration. Mr Hughes's complaint was not upheld.
Cheshire Food Services Pension Scheme – Mr Harrison
Mr Harrison brought a complaint to the Pensions Ombudsman following the decision from his pension provider, Prudential, to not accept his request to transfer.
On 20 May 2013, Mr Harrison notified Prudential of his wish to transfer to the Cheshire Food Services Pension Scheme (Cheshire FSP). Prudential were not willing to progress the transfer and expressed fears of, potentially fraudulent, pension liberation. Their main concerns being Mr Harrison's age (being some ten years under minimum pension age), that the scheme administrator was only recently registered as a company and that Cheshire FSP was only recently registered with HMRC.
In response, Mr Harrison wrote to Prudential acknowledging the threat the pension's industry experienced in respect of liberation scams and provided answers to their raised concerns. Mr Harrison was adamant that the transfer was to proceed.
In November 2013, alive to their regulatory duties, Prudential, again, refused to action the transfer.
Whilst the Pensions Ombudsman admitted that Cheshire FSP failed the statutory test for being a proper destination for a transfer, Mr Harrison had a separate contractual right under Prudential's scheme rules which entitled him to a transfer. Further, if Prudential had concerns in respect of Cheshire FSP they could have brought it to HMRC's attention.
The Ombudsman concluded that it was not for Mr Harrison to prove that the transfer was recognised and/or that he did have a contractual or statutory right. It was for Prudential to satisfy themselves that he did not have a right to transfer.
Had Prudential followed the correct approach, they should have reached the decision that Mr Harrison was entitled to exercise his contractual right to transfer to Cheshire FSP. Therefore, the Pensions Ombudsman directed that within 14 days of Mr Harrison requesting the transfer to the Cheshire FSP, if received within 56 days, of the Determination, Prudential are to pay the transfer value to Cheshire FSP. This figure being the higher of the transfer value when first requested on 31 July 2013 plus simple interest, or, the transfer value at the date of payment.
The Harrison determination is in line with previous determinations that a statutory or contractual right to transfer trumps any concerns that the transferring issuer may have about the determination for the transfer value.
Clyde & Co Comment
The Winning and Hughes determinations are focussed on whether this is a duty to warn about pensions liberation. On the facts it would have been hard to find fault given that the transfers were before or contemporaneous with Pension Regulator guidelines being issued. It will be interesting to see what approach the Ombudsman would take to a transfer after the Pension Regulator warnings were issued, albeit this looks very much like a limited duty to warn only and there is a causation point in that the member may well have transferred even if guidance had been issued. The cases to date have all concerned transfers from insurers and it will be interesting to see, if a claim is brought against trustees of an occupational pension scheme, whether the Ombudsman takes a different approach. We suggest he will take a consistent approach between FCA regulated insurers and unregulated trustees.
Away from the Pension Ombudsman, the companies that acted as trustees of the Henley Retirement Benefit Scheme and the Capita Oak Pension Scheme have been placed into provisional liquidation by the High Court.
Omni Trustees Ltd were the trustees of the Henley Retirement Benefit Scheme, which received £8.6 million from members of the public, of which £3.6 million was invested in self-storage units and £3.7 million was held in cash before being transferred to another occupational scheme in July 2014.
Imperial Trustee Services Ltd were the trustees of the Capita Oak Pension Scheme, which received £10.8 million. The Insolvency Service said the company had suffered from "governance issues, with several directors coming and going in quick succession and also from an inability to transfer member benefits in accordance with their wishes".
The provisional liquidation may give some members some reassurance that any assets would not now be moved out of the schemes, but would give no certainty as to how much they would be able to reclaim. The Insolvency Service says that further information will be made available once the petitions to wind up the companies have been heard in the High Court in Manchester on 22 July 2015.