Personal Pension 

When liberation does not mean freedom

This month, I will be discussing the first Pensions Ombudsman determination on “pension liberation”, in which Mr X sought to compel a transfer of his pension benefits out of the Capita Oak Pension Scheme. The ombudsman upheld the complaint against the Capita Oak Scheme although it was noted that, sadly, some or all of the money may no longer be available.

The practice of pension liberation involves a transfer out from a genuine pension scheme to a pension scheme purporting to offer higher returns or to allow access to a scheme member’s pension savings before the age of 55 and/or to more cash than would normally be allowed. “Pension liberation” schemes expose the member to significant tax charges and typically levy substantial fees for arranging the transfer.

Mr X was an active member of the NHS Superannuation Scheme (Scotland). In April 2012, he authorised a firm called the Pension Specialist to request a transfer value for his benefits under the NHS Scheme. The Scottish Public Pension Agency gave an estimate of the transfer value and explained that Mr X, as an active member would need to opt out of the NHS Scheme before he could transfer.

Mr X signed the opt-out form and requested the SPPA to deal with the Capita Oak Scheme to process the transfer. The SPPA issued a “Pension Liberation Factsheet” and a declaration for Mr X to sign that he had “been made aware of the implications of transferring to a UK non-contracted out defined contribution scheme”.

In March 2013, the SPPA transferred around £367,000 to the Capita Oak Scheme. Mr X was told that the Capita Oak Scheme would invest in Storefirst, a large self-storage firm in the north of England apparently offering an 8 per cent to 12 per cent return on investments. His application form for membership of the Capita Oak Scheme authorised the deduction of a 5 per cent fee from his member account and various other deductions.

Mr X requested a transfer out of the Capita Oak Scheme in July 2013. He did not name the scheme his benefits would be transferred to. Mr X chased for a response from the administrator of the Capita Oak Scheme by phone and in writing on numerous occasions. Mr X complained to the ombudsman to compel the transfer of his benefits out of the Capita Oak Scheme.

The administrator did not respond to the ombudsman’s investigations.

Although the ombudsman noted that there was little doubt that it was against Mr X’s interests to transfer out of a generous public sector pension scheme, Mr X’s complaint did not extend to his decision to transfer to the Capita Oak Scheme.

The governing documentation of the Capita Oak Scheme was not available for review, so the ombudsman could not decide whether Mr X had a right to transfer out under its rules. Instead, the ombudsman, following the administrator’s description of the Capita Oak Scheme as an occupational pension scheme, concluded that Mr X had a statutory right to a cash equivalent transfer value under the Pension Schemes Act 1993 within six months of his request.

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