There was something missing from the Pension Ombudsman’s decision in the Pension Ombudsman case of Mr R (PO-10365). However, the decision was right in law, following the Hughes vs Royal London Mutual Insurance Society Ltd case authority that the ultimate decision on a pension scheme member taking a statutory transfer lies with the member.
The member had a history of trying to take a transfer from the scheme concerned (which was the London Pension Fund and Newham Council administered Local Government Pension Scheme), and there is no doubting the Pension Ombudsman and the PO adjudicator’s conclusion that even if Mr R had been given a warning about potential scams, he would nevertheless have proceeded with the transfer and therefore never seen his £62,780 pension savings again. The logic applied and the conclusion reached, that Mr R should receive £1,000 for distress and inconvenience but should not be made good the other £61,780, is beyond reproach. The decision is right in law but the outcome – Mr R on course to lose his retirement savings – is just as compellingly wrong.
Recognition that decisions in accordance with the current law are not necessarily yielding the desired outcomes (such as in the Mr R case) is beginning to emerge, if somewhat slowly. A recent government consultation which aimed to tackle the ability of potential scammers to open, market and receive transfers into fraudulent schemes has concluded that the scope of the individual scheme member’s power to take a transfer value should be restricted. Members will only have a statutory right to transfer to FCA authorised personal pension schemes, authorised master trusts or schemes with an evidenced and genuine employment link to the member. Unfortunately, these restrictions will take a while to come into effect and it will likely be as late as 2019 once the master trust authorisation regime is in operation.
The restrictions will come too late to save Mr R’s retirement savings from the suspected fate of a scam transfer. Perhaps the missing link in Mr R’s case was a genuine sense that justice was being served even if the case was decided correctly. Hopefully the recently announced restrictions will pick up the missing pieces.
This blog post was written by Patrick Kennedy. For further information, please contact:
Patrick Kennedy, partner, Pensions
T: 0161 836 7788