Pensions Ombudsman  

MoD to reinstate Armed Forces Scheme member after scam transfer

The MoD tried to argue that the ombudsman has typically allowed a grace period allowing for scheme administrators to become aware of, and act on, updated guidance from regulators. However, the ombudsman did not accept that it had recourse to this grace period, which is typically one month, since its decision in the case of Mr S was made six months after TPR published its guidance.

Sackers partner James Bingham said that, given the frequency of new guidance, “it is not unusual for transfer requests to be made in the ‘grey area’ as administrators and trustees adapt from an old regime to a new regime. 

“In our experience, the Pensions Ombudsman will consider each case on its particular facts and the key issue is whether, in the circumstances, it was reasonable for an administrator to progress the transfer in line with the previous industry practice or whether they should have switched their processes to meet the new requirements." 

Besides a £2,000 payment for the severe distress and inconvenience caused to Mr S, the ombudsman also ordered the MoD to restore his benefits and entitlement.

The AFPS is thus obliged to give to Mr S the same status he had enjoyed before the transfer, as though that transfer had never in fact occurred.

The MoD had argued that it was impossible to restore Mr S to the AFPS because the relevant section is now closed to new members, and the scheme rules would not allow his re-admittance. 

The alternative would be to establish a new, bespoke scheme solely for Mr S’s benefit, which the MoD said would put him in a superior position relative to other members, and result in an outcome better than he would have achieved through the courts.

Ombudsman Anthony Arter countered that, where the law is concerned, Mr S “is not a new member, but a previous member whose membership ought never to have ceased”. 

“He should therefore not be considered as rejoining the AFPS, but rather as having continuing membership as a deferred member. Moreover, as Mr S’s transfer was invalid at law, it reverts back to the originator/the scheme,” he said.

Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert