CompaniesJan 12 2015

Providers demand more powers on pension transfers

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Providers demand more powers on pension transfers

Providers have praised the Pension Ombudsman’s first wave of pension liberation decisions but senior industry figures have warned they may need more support from regulators to tackle liberation, especially ahead of new pension freedoms coming in April.

Last Friday (9 January), the first wave of three decisions were published which largely backed up providers over refusals to transfer within the six months deadline following a request, though questions remain amid criticism that none of the providers had carried out sufficient analysis.

Emphasising the primacy of the statutory right to transfer, in his concluding remarks Mr King acknowledged that schemes and pension providers “find themselves in a highly unenviable position”.

However, he only partially upheld one complaint and completely rejected two of the three against Aviva and Zurich, citing legislation which states the right to transfer only holds on workplace schemes if the transfer is to another bone fide occupational scheme.

Speaking to FTAdviser, Adrian Boulding, pensions strategy director at Legal and General, said he was “encouraged” by the determinations and that the ombudsman is backing the efforts made by industry in stopping pension liberation.

He said the ombudsman had “recognised that as pension providers we have a duty of care to our customers” and that the determinations prove that having an HMRC approval number “doesn’t make a scheme a proper pension scheme”.

In the Aviva decisions, Mr King states that a scheme would be occupational if it had within its scheme rules descriptions “from which... employments can be identified”.

Mr Boulding explained: “The point of law that these cases are all turning on is that a customer’s statutory right to take their money away from their existing pension provider is dependent upon them having a proper pension scheme to transfer it to.”

John Lawson, head of policy at Aviva, said the regulator had shown it is “sympathetic to what we are trying to achieve” but that more powers were needed, including that providers should have the “power to defer indefinitely”.

Mr Lawson argued that if a provider have documentation from either The Pensions Regulator or HM Revenue and Customs which confirms there is “sufficient suspicion” of a scheme, it should be able to defer until the regulator has concluded its investigation into the scheme.

He added that the government should launch an awareness campaign prior to the new pension freedoms coming in, warning that over-55s who can withdraw their pot may be targeted to invest in high risk schemes, with the promise of ‘guaranteed’ returns.

Andy Leggett, head of Sipp business development at Barnett Waddingham, told FTAdviser that reputable providers could face a ‘damned if you do, damned if you don’t’ scenario, saying that while the rulings give a degree of support they do not eliminate the conundrum.

“The ombudsman has provided lengthy and carefully considered comment on the law but in this situation other bodies need to help.

“Considerable costs are incurred by reputable providers in, among other things, the fight against pensions liberation – what could be viewed as not just costs of regulation but policing rules, too.”

Martin Tilley, director of technical services at Dentons, echoed Mr Leggett and warned costs could increase for consumers if providers are forced to “intensely” examine all of a receiving scheme’s documentation.

“I am struck by the degree of investigation the ombudsman has had to undertake in order to come to their decisions. The insurers were correct in withholding the transfers although it seems they had not themselves investigated to the same degree that the ombudsman has.”

He added: “The unfortunate conclusion as it appears though is that if a valid request is made for transfer to a properly constituted scheme, statute requires that the transfer be made, irrespective of the fiduciary concerns of the transferring scheme.

“One would hope with the new pension freedoms available, the need to seek out or use these liberation schemes might become less.”

donia.o’loughlin@ft.com