AnnuityMar 8 2018

Pension pot handed to scammers due to regulator's silence

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Pension pot handed to scammers due to regulator's silence

Equitable Life has been told it won't have to compensate a client whose pension was transferred to a fraudulent scheme and who now has been left without a penny.

In June 2010 Equitable Life wrote to the complainant, referred to as Mr S, and provided him with options in relation to his pension, including a transfer to a different scheme.

On 7 July 2010, Tudor Capital, acting as the administrator for the Salmon Scheme wrote to Equitable Life, enclosing a completed transfer application form, and confirmed that Mr S wished to transfer.

By this date, The Pension's Regulator had suspended Tudor Capital from acting as a trustee stating that the Financial Services Authority, HM Revenue & Customs and The Pensions Regulator were investigating the firm's actions.

Yet the regulators did not publish their decision to suspend Tudor Capital until January 2014 so Equitable Life was unaware of the watchdog's action when it was approached by the business with a request to take Mr S's pot.

However in July 2010, Equitable Life responded to Tudor Capital stating that the transfer could not go ahead as there had been no confirmation of how the pension would be operated and whether it could accept an unsecured pension.

As Mr S was already in drawdown, Equitable Life stated he could only transfer to purchase an annuity or to another scheme which offered an unsecured pension facility.

Several times throughout July and August Tudor Capital rang Equitable Life asking for assistance with the transfer firms.

Eventually on 24 August 2010, there was a discussion between Equitable Life and Andrew Meeson, tax director of Tudor Capital, as to whether the Salmon Scheme could provide unsecured benefits for Mr S.

Following this call, Equitable Life was persuaded that the transfer could proceed and the Salmon Scheme could provide an unsecured pension arrangement.

In August and September Equitable Life transferred the pot to the Salmon Scheme.

But on 7 January 2015, Mr S spoke to Equitable Life requesting information on where the plans had been transferred to.

Equitable Life confirmed that both plans had been transferred into the Salmon Scheme.

Over the following months Mr S made further requests for information and raised a complaint about Equitable Life’s decision to transfer.

In a final ruling, Anthony Arter, pensions ombudsman, said he could not make findings against the financial adviser but pointed out Mr S may wish to pursue an alternative route of redress via the Financial Services Compensation Scheme.

Mr Arter said: "Mr S was a victim of a pension liberation scam, an issue which has become more prevalent over recent years.

"Under current case law, where an individual has a statutory right to transfer, the transferring scheme is obliged to process the transfer despite any concerns it might have about the quality of the receiving scheme."

The ombudsman noted Mr S’ transfer request was made in 2010 and it was not until February 2013 that industry good practice changed and more rigorous due diligence on transfers became typical.

As the Salmon Scheme was able to provide evidence that it was registered with HMRC, and it declared that it would provide benefits in accordance with the relevant legislation, the ombudsman ruled Equitable Life took the steps it was required to back then.

He said: "Although Equitable Life could have requested sight of the Salmon Scheme rules to investigate this issue further, such a request was not typical and there was no reason for it to further question what it was being told.

"Equitable Life could have written to HMRC to check the status of the Salmon Scheme. However such a request was not standard due diligence in 2010, and Equitable Life had no reason to doubt the Salmon Scheme’s registration given that evidence of registration had been provided.

"I take the view that Equitable Life’s initial decision to push back on the transfer, because of questions over its ability to accept unsecured pension arrangements, is reassurance that it was acting in Mr S’ best interests."