The Ministry of Defence must reinstate a former member of the Armed Forces Pension Scheme and pay him £2,000, after wrongly allowing him to transfer to the Capita Oak Pension Scheme, a scam that invested in storage pods
The case concerned Mr S, who had been an active member of the AFPS from November 3, 1988 to February 12, 2001, after which he became a deferred member.
He was approached by a representative of the Capita Oak scheme and persuaded to transfer his benefits into it, on the promise of higher returns than he would have enjoyed under the AFPS.
The AFPS received his transfer request in January 2013, and the MoD provided him with a notional transfer value later that same month.
It subsequently checked that the Capita Oak scheme was registered with HM Revenue & Customs as part of its due diligence checks, but the transfer was then delayed for several months, as Mr S had not provided the MoD with sufficient proof of identification.
In the interim, the Pensions Regulator published updated guidance on scams and transfers, but the MoD did not use the delay as an opportunity to implement the new requirements. It only began implementing them in November 2013, after Mr S’s transfer had been completed.
In August, Mr S provided the MoD with proof that he was in receipt of jobseeker’s allowance, a fact which proved crucial to the Pensions Ombudsman’s determination as it established that the MoD was in possession of information affecting Mr S’s transfer rights — specifically, information that proved he had no such rights, because he was not an “earner” as defined and required by the Capita Oak scheme rules.
The transfer nonetheless proceeded, and the MoD gave final approval in September 2013. The Capita Oak scheme subsequently failed and Mr S appealed to the ombudsman, alleging that the MoD had failed to carry out due diligence checks that would have stopped the transfer.
Part of the MoD’s defence against the charge of maladministration rested on the timing of Mr S’s transfer request. It argued that he applied for the transfer before TPR issued its updated transfers guidance in February 2013, with the MoD completing its formal due diligence processes in March in accordance with the law and guidance as it existed before the update.
According to the ombudsman’s decision, the MoD’s contention was that the ombudsman “must apply the standards of good administration as they stood at the period in question, not subsequently or with the benefit of hindsight".
The fact that Mr S’s request was not finalised until September was irrelevant, the MoD contended, since the due diligence checks were already complete and it was simply waiting for Mr S to provide it with proper identification.
The ombudsman gave this argument short shrift, however, countering: “I do not believe it is tenable for a reasonably competent pension provider to argue it was not aware of the regulator’s announcement before September 2013, and therefore unable to put the guidance into practice until November 2013.”