Following the publication of the Pensions Ombudsman’s first determination on “pension liberation” in December 2014, this month I will be discussing three further Pensions Ombudsman determinations where members seeking to transfer into suspected “pension liberation” schemes have been prevented from doing so by their scheme providers.
Pension liberation schemes involve a transfer out from a genuine scheme to a pension scheme purportedly offering high returns or allowing early access to a member’s funds. Members w transfer into these schemes can be subject to significant fees and tax charges.
Kenyon (PO-1837) and Jerrard (PO-3809): In the cases of Jerrard and Kenyon, the ombudsman held that active members of Aviva and Zurich personal pension schemes respectively did not have a statutory right to transfer to suspected pension liberation vehicles, nor did they have a transfer right under the scheme rules.
In both cases, the ombudsman dismissed the member’s complaint on the basis there was no legal right to the transfer, rather than because of the suspected nature of the receiving scheme. The main reason that the ombudsman considered that there was no statutory right to transfer was that the intended receiving schemes were not within the definition of “occupational pension scheme” under the Pension Schemes Act 1993.
In Jerrard, altugh he dismissed the complaint, the ombudsman noted that Aviva did not appear to have properly considered whether the complainant had a legal right to a transfer. Aviva “went beyond” the Pensions Regulator guidance on pension liberation by refusing the transfer witut following the range of steps suggested by the guidance in such circumstances. Similarly, in Kenyon, the ombudsman noted that Zurich had reversed the burden of proof, taking the view that it was for the member to prove that the transfer was recognised and/or that she had a statutory right. In the ombudsman’s view, this was an incorrect approach.
In both cases, the ombudsman found that the pension provider had reached the right decision, but for the wrong reasons. Perhaps an interesting point is the ombudsman’s finding in Jerrard that the provider suld not have relied on the FCA Handbook in stopping a transfer potentially involving fraudulent liberation. In both cases, the ombudsman emphasised the fact that any statutory right to transfer would have taken precedence over regulatory guidance that was not consistent with that right. This is surely correct, ensuring that a regulatory mechanism could not be used to frustrate a member’s legal rights.
Stobie (PO-3105): The Pensions Ombudsman held that a member of a self-invested personal pension scheme did not have a statutory right to transfer his cash-equivalent transfer value (CETV) to a scheme which Standard Life, the Sipp administrator, suspected to be a pension liberation vehicle. Altugh the ombudsman concluded that the intended receiving scheme was an “occupational pension scheme”, it was decided that Mr Stobie was not an “earner” in relation to a scheme employer, so he failed to meet the statutory test.
The ombudsman partially upheld the member’s complaint that Standard Life refused to make the transfer. Standard Life had failed to properly consider exercising discretion under the Sipp’s rules to pay a transfer value on written request when there was no statutory right to a CETV. In addition, Standard Life had not followed the steps in the Pensions Regulator’s guidance on pension liberation. Had it done so, it would have established that the member did not have a statutory right. If there had been a statutory right, its suspicions about pension liberation might have justified a delay while it asked the relevant questions during the statutory period allowed for the transfer.