The Pensions Ombudsman has backed Royal London, stating the provider was within its rights to not allow a pension transfer to a small self administered pension scheme, although the ombudsman was critical of the firm’s communication.
Donna-Marie Hughes complained to the ombudsman that Royal London had refused to transfer her £8,359.71 Royal London personal pension to the Babbacombe Road 1973 Limited Ssas.
Newly-appointed pensions ombudsman Anthony Arter found that Royal London’s decision to refuse the transfer was consistent with the law, however the provider could have communicated their concerns and the basis for the refusal decision in a better way.
The case, which the ombudsman described as “typical of one presenting itself across the pensions industry in relation to pension liberation”, stems from July 2014 when Miss Hughes, aged 41, made her application to transfer to Babbacombe.
On 8 September 2014, Royal London replied saying that they were not prepared to transfer Ms Hughes’ pension to the requested scheme because they had been unable to satisfy themselves that it would be used for the purposes of providing appropriate pension benefits under a registered pension scheme, adding they would consider any request to transfer to an alternative scheme.
The transfer application and accompanying paperwork was submitted by Bespoke Pension Services Ltd, who acted on behalf of Miss Hughes.
The decision flagged up that Babbacombe is not trading at present, Ms Hughes was the only individual employed and does not currently receive a salary from the company.
Miss Hughes indicated in her transfer request that she had originally been contacted by UK promoter First Review Pension Services as she had expressed an interest into transferring her existing pension funds into a Ssas through which she had the opportunity to invest in Cape Verde (among others) and First Review had introduced her to Bespoke.
According to Royal London, Miss Hughes was cold-called.
Miss Hughes wrote to Royal London on 14 October 2014, challenging its refusal, however on 23 October 2014, Royal London again refused the transfer application.
The decision said that following the publication of previous pension liberation decisions, Royal London and a number of other providers reviewed cases where transfers had been refused.
Royal London reaffirmed their decision in Ms Hughes’ case and provided fuller details of their approach in their letter to the ombudsman on 26 March 2015, which was sent to Bespoke.
Bespoke told the pensions ombudsman it was “entirely unjust” for Royal London to refuse her statutory right to transfer to another fully registered scheme, stating that the refusal had prevented the improved growth of her pension fund and claimed compensation for investment return losses.
Royal London argued that Babbocombe - the principal employer - was only registered shortly before the transfer request and the Ssas was registered by HMRC a few days later and that Ms Hughes’ employment agreement was non-specific on her role and remuneration.
Therefore Royal London concluded that whilst it was not necessarily the case that the Ssas had been set up to facilitate pensions liberation, it “appeared likely” that the Ssas could not be correctly categorised as an occupational pension scheme, so Ms Hughes did not have a statutory right to transfer to it.
However, the ombudsman ruled that the scheme “was, as it appeared to be, an occupational pension scheme”. He also found there was no evidence that there would have been an unauthorised payment out of the receiving scheme, and there was no reason to object to the transfer as being itself an unauthorised payment.
The ombudsman agreed with Royal London that there was no detail given regarding Miss Hughes’ employment. Mr Arter found that as Miss Hughes had “no relevant earnings”, she was “not an earner” and so her request for a cash equivalent transfer value was not for securing transfer credits.
“She had no statutory right to take a cash equivalent transfer value,” was the ombudsman’s conclusion.
However, the ombudsman was critical of Royal London, stating that while the provider considered there was no statutory right to transfer, it did not explain their decision properly to Ms Hughes.
“If they had done so, it might have made Ms Hughes reconsider her transfer request or at least take further independent advice on her position. Having completed their due diligence and concluded that there was no right to transfer they should have been able to justify that to Ms Hughes.”
donia.o’loughlin@ft.com
This article has been amended since original publication to include additional detail from the Determination.
