Several pension providers have been given backing for controversial decisions not to agree to client transfer requests, as the Pension Ombudsman published the first wave of long-awaited decisions on complaints related to pension liberation.
In particular, outgoing pensions ombudsman Tony King ruled that Aviva and Zurich were within the law in refusing to transfer a member’s workplace pension fund, referring to provisions in the Occupational Pension Schemes Act 1996 which do not oblige transfer requests to non-workplace scheme.
In a separate decision, Standard Life was partially backed after blocking the transfer of a client’s self-invested pension, though the complaint against the firm was partially upheld as a result of a failure to recognise that its own Sipp rules gave it more discretion to act.
The industry will breath a sigh of relief at the findings, as many had thought the Pension Schemes Act 1993 required transfers to be processed to any registered scheme of any type within six months.
However, the ombudsman did say that he felt none of the three providers had sufficiently “carried out the analysis to establish” the statutory right to transfer, in comments that emphasise the difficult position providers face.
In a live debate yesterday (8 January), pensions minister Steve Webb said he hoped the decisions would clarify trustees’ position and emphasise their duties, in response to a question asking whether the government would take action to enshrine the right to block transfers in law.
He refused to be drawn on the findings and said simply that the ombudsman was “rightly independent” of government.
In the ruling involving Aviva, a client named Sharon Jerrard complained after being blocked from transferring her £5,368.84 pension fund from Aviva’s personal pension scheme to the SCCL Pension Scheme.
The transfer application to the SCCL scheme was the third enquiry that Ms Jerrard had made about transferring, all of which were declined by Aviva.
In November 2013 Aviva said that they would not be proceeding with the transfer as it had introduced “extra due diligence procedures” to its transfer process to ensure it was acting in the best interest of its plan holders.
At this point, Ms Jerrard confirmed to Aviva she had read the rules around pension liberation and still wanted it to go ahead. One month later, Aviva wrote back and said its position was unchanged.
In the case involving Zurich, Diane Kenyon wished to transfer her £31,000 pot from Zurich’s personal pension scheme to the Axiom Umbrella Pension Trust.
In October 2012, Ms Kenyon rang Zurich requesting a transfer and in December she wrote again stating that she had not received a cash incentive promised by Axiom. Zurich had responded quoting FSA and the Pensions Regulator guidance against case incentives and warning of tax charges.
Zurich issued its final response in January 2013, stating that it was not going to transfer, as it could result in her “personally incurring unauthorised payment tax charges from HMRC, which currently total 55 per cent of the value of the fund you transferred”.
“In addition, we as the transferring administrator could be liable to a charge of up to 40 per cent,” it added.
The third decision, involving Standard Life Sipp, found that Gregory Stobie did not have a statutory right to transfer, primarily because the transfer would not have secured “transfer credits” which required him to be an earner in relation to the scheme.
However, the rules of the Sipp Standard Life gave discretion in whether to allow a transfer nevertheless, which they were said to have not even considered.
After receiving a request in May, Standard Life wrote to Mr Stobie in June and said that they were not going to proceed with the transfer. The letter referred to “warning signs” that schemes were being used for pension liberation and alerted the Pensions Regulator to the scheme.
The following month, Shredded Image wrote to Standard Life, stating that it does not allow “unauthorised withdrawals from pension schemes to take place”, and Standard Life responded stating that its position was unchanged.
The ombudsman found that Sipp regulations do not entitle consumers to an “absolute freestanding right to a transfer”.
However, he found that Standard Life did not assess what their legal and regulatory obligations were before deciding not to agree to the transfer and they did not take the steps that the Pensions Regulator had suggested.
Mr Stobie said that he wanted to use the money to support his new business. The indication from its website is that Shredded Image is not trading even now and, as such, Standard Life is not required to pay any compensation.
donia.o’loughlin@ft.com
