Out-Law News 3 min. read
14 Jul 2016, 10:36 am
The individual, known only as Mr T, claimed that Royal London should have made "adequate checks to ensure Capita Oak was a genuine pension scheme" before allowing him to transfer £112,541.90 to the new provider in November 2012. The ombudsman disagreed, finding that there was "no evidence" that Royal London had "any specific concerns" about the receiving scheme that "might have warranted a refusal of Mr T's statutory transfer right".
"The determination is consistent with the ombudsman's approach to date when considering maladministration claims against providers who allowed transfers to schemes that have turned out to be suspected pension scams: if the transfers pre-date commencement of the Pensions Regulator's 'scorpion' campaign in February 2013, the ombudsman does not expect to see significant evidence of due diligence having been undertaken," said Ben Fairhead, an expert in pension liberation scams at Pinsent Masons, the law firm behind Out-Law.com.
"Interestingly, this determination is also the first to consider the impact of the High Court appeal in Hughes v Royal London earlier this year, which has made it more difficult for a provider or trustee to find legal justification to decline to make a transfer, even where a pension scam is suspected. That impact is viewed negatively by many in the industry who are currently grappling with suspicious transfer requests – however, the quid pro quo is that it is going to be easier for a provider or trustee facing a complaint from a member who lost out as a result of such a transfer to assert that its hands were tied given the absence of legal justification to refuse a transfer request," he said.
To date, the Pensions Ombudsman has dealt with a number of complaints brought by pension scheme members against providers who approved transfers into the Capita Oak scheme, which went into liquidation in June 2015. These cases have so far involved transfers made before February 2013, when the Pensions Regulator first issued detailed guidance to providers about the dangers of so-called pension 'liberation' and related scams.
"This could be regarded as a point of change in good industry practice – in terms of the due diligence expected," the ombudsman said in his determination.
"The recent High Court judgment in Hughes v Royal London indicates that Royal London could not have legitimately refused Mr T's transfer request, had they wished to do so … The regulatory guidance ... provided advice on areas for potential concern, flags and appropriate warnings. The fact that Royal London - and the industry generally - may have already been discussing similar points … does not impose a duty on them to go further than the law or the regulator required at the relevant time," he said.
Last year, the ombudsman ruled that Royal London had been entitled to prevent one of its customers, Donna Marie Hughes, from transferring her pension into a small self-administered scheme (SSAS) which was set up as an occupational pension scheme, on the grounds that Hughes was not an 'earner' under the rules of the receiving scheme. Giving judgment in January, the High Court ruled that he had not been entitled to do so – effectively closing a common method used by providers to justify their refusal to transfer pension rights if they suspected that the new scheme was being used for pension liberation.
Mr T had asked for his case to be referred to the ombudsman for full determination after it was originally disposed of by way of an informal opinion from an adjudicator. Following his appointment to the role last year, new ombudsman Anthony Arter announced that formal determinations would now be reserved in the first instance for those cases that involve a new point of law, are representative of a large number of complaints, are particularly complex or will almost certainly be appealed. This is intended to speed up and simplify the dispute resolution process.
"The ombudsman's shift towards using adjudicators to consider complaints makes particular sense in the context of pension liberation where similar type complaints have arisen over the past year and a half," said Ben Fairhead of Pinsent Masons. "Indeed, it is bound to make for greater efficiency and remove the need for the vast majority of complaints in this area to be subject to full determination."