Ombudsman: no statutory right to transfer when pension already in payment

The individual, known only as Mr I, had been told by trustees Aon Hewitt that as a retired member, he had no statutory right to transfer his benefits out of the Banca Commerciale Italiana Retirement and Death Benefits Scheme (BCI scheme). Checks carried out as part of the transfer process had also shown that the receiving scheme "may be associated with pension liberation", according to the ombudsman's determination.

Pension disputes expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law.com, said that the fact that Mr I had persevered with his complaint to the ombudsman showed "the scale of the difficulties in warning members of the public away from pension scams". The prospective receiving schemes in this case were already under investigation by the Pensions Regulator, which had gone as far as to appoint an independent trustee, he said.

"Here, the ombudsman has again had to fall back on a technical argument, in this case the fact that Mr I had already started to receive his pension and therefore did not, applying the wording in the legislation, have a statutory right to transfer," he said.

"As it happens, it is highly unlikely that even an individual who had not started to draw his or pension would have a statutory right, given the new trustee of the suspected liberation scheme would, on the back of the regulator appointment, be unlikely to allow further transfers in - another key element of the statutory right test. Nonetheless, intervention by the Pensions Regulator really ought to be enough to deter someone from making a transfer, and it is surprising that this has gone as far as a determination," he said.

Pension liberation arrangements market themselves as a means of giving pension scheme members access to savings that are tied up in a pension scheme. However, they can put members' savings at risk.

Mr I had been granted an early retirement pension on ill health grounds with effect from 2 July 2012, according to the ombudsman's determination. In September 2013, following discussions with his financial adviser about how he could increase his monthly income, he requested a transfer to a scheme known as the Gresham Pension Scheme.

In January 2014, he was informed that the Gresham scheme had been closed so could not receive a transfer payment. He then requested a transfer to the Abbey Mage Pension Scheme. He received a response from Aon Hewitt, trustee of the BCI scheme, in October, refusing this request. Mr I appealed through the scheme's internal dispute resolution procedure and, once this route was exhausted, to the Pensions Ombudsman.

The 1993 Pension Schemes Act gives the member of a pension scheme the statutory right to transfer pension savings to another pension arrangement, provided that specific conditions are met. One of these conditions, as expressly set out in the 1993 Act, is that "no crystallisation event" can have occurred in relation to the member's benefits.

"As payment of Mr I's pension had started in 2012, it follows that he did not have a statutory right to transfer out," the ombudsman said.

Although the rules of the pension scheme gave the trustees discretion to allow a transfer even where there was no statutory right, they were entitled to use that discretion to refuse the transfer, the ombudsman added.

"I accept that it would have been frustrating for Mr I not to be able to make the transfer that he wanted, but the trustees had good reasons for not exercising their discretion," he said.

He added that it would not be appropriate to make any award to Mr I for his alleged "distress and inconvenience" given the circumstances of the case.