Providers have one month to update processes, ombudsman warns

Providers have one month to update processes, ombudsman warns

The Pensions Ombudsman expects providers to update their transfer processes, due diligence checks and member communications within one month of the new scams regulatory guidance being issued.

The new time frame, announced in a recent decision, is significantly less than the three-month period the ombudsman had previously indicated would be acceptable. 

It followed a case brought against Aegon, in which the client complained the provider had failed to update its processes in time, leading to a transfer that otherwise would not have happened.

The PO did not find against Aegon but told providers it was now expecting them to act faster.

The case

In 2017 Mr R, a member of the Scottish Motor Auctions Ltd group personal pension plan, put forward a complaint against Aegon.

In 2012, Mr R had transferred his pension benefits to a smaller scheme administered by Greenchurch Capital. The scheme then submitted paperwork to Aegon on February 13, 2013, a day before The Pensions Regulator issued its new Scorpion leaflet and updated its regulatory guidance on pension scams. 

On February 15, Aegon transferred an amount of £21,461.92 to Greenchurch. However, an administrative error within the receiving scheme’s bank meant that the entire transfer value was refunded back to Aegon.

The transfer was completed on March 19, more than a month after the Scorpion literature was published.  

As result, Mr R complained that Aegon had failed to do the appropriate checks before transferring his pension to Greenchurch. He also argued that Aegon should have known that the receiving scheme’s administrator was not regulated by the Financial Conduct Authority. 

Furthermore, Mr R stated that Aegon did not act with the new due diligence expectations, which the regulator set out in the Scorpion guidance document. 

The document detailed information for both providers and consumers relating to pension scams and listed several points associated with potential scams, including a warning on schemes that were newly registered with HM Revenue & Customs. 

Mr R stated that Aegon had failed to inform him of the risks of transferring his pension benefits to the small self-administered scheme, and said if he had known then he would not have proceeded with the transfer.

At the time, Aegon claimed that it acted appropriately and conducted adequate due diligence. 

The provider pointed to previous determinations in which the ombudsman said that providers should be given up to three months to update their transfer processes following the publication of the Scorpion guidance. 

The ombudsman did not proceed with Mr R’s complaint and found that Aegon had acted appropriately, agreeing that the provider was not required to have updated its transfer processes before the date the transfer was originally made.  

However, the ombudsman reviewed the cases he previously determined on the issue and considered that “a period of approximately one month would generally be sufficient for a provider to put in place any procedures necessary as a result of the regulator’s new guidance”.