The Pensions Ombudsman has published its first determination of a case relating to “pension liberation” or “pension scams”.
The case concerns an individual who was persuaded to transfer out of their employer’s pension scheme and who may have lost his money.
In the week beginning 6 January 2015, the Ombudsman is expected to publish a group of cases about individuals who have wanted to transfer their benefits out, but whose transfers have been “blocked” by their pension schemes.
Mr X had been a member of the NHS Superannuation Scheme (Scotland) (the NHS Scheme), before transferring his benefits to the Capita Oak Pension Scheme (the Capita Oak Scheme) in March 2013.
Although his complaint relates to his subsequent request to transfer his funds from the Capita Oak Scheme, it is worth noting a few details in relation to the original transfer.
Mr X had authorised “thepensionspecialist.com” (a trading name of Douglas Baillie, a firm authorised by the then FSA, but now no longer registered) to act on his behalf. He sought a transfer of his NHS Scheme benefits to the Capita Oak Scheme, which was described as a registered occupational pension scheme managed and administered by Imperial Trustee Services Limited (ITSL).
The Ombudsman reviewed various transfer documents, including an application form which authorised a deduction of a 5% fee from Mr X’s member account on joining the Capita Oak Scheme and various other deductions. Before the transfer went ahead, Mr X was required to sign a declaration that he had “been made aware of the implications of transferring to a UK non contracted-out Defined Contribution Scheme”, as well as a “Pension Liberation Factsheet”.
Mr X said that he:
The opening unit statement showed that an initial 5% charge of £18,380.09 had been deducted from the transfer value.
In July 2013, Mr X wrote to ITSL requesting a transfer out of the Capita Oak Scheme. However, he did not stipulate a scheme to which his benefits should be transferred. He sent a follow-up letter nearly four weeks later and his new financial adviser chased ITSL for a response, without success. Further attempts to contact ITSL by phone and letter also failed to elicit any response.
ITSL did not respond to the Ombudsman regarding Mr X’s complaint. However, towards the end of the investigation, the Ombudsman was informed by chartered accountants who are investigating the financial affairs of the Capita Oak Scheme that “£9.8 million was invested in storage pods with a company called Store First Limited [sic]… As the entire scheme was invested in these pods it is impossible at this moment of time for any transfer to be made on behalf of Mr X”.
The Ombudsman found that the fact that ITSL had not responded to Mr X’s transfer request was “unquestionably maladministration”.
As ITSL did not make available any governing documentation relating to the Capita Oak Scheme, it was impossible for the Ombudsman to assess whether Mr X had a freestanding right to a transfer.
However, whilst strictly speaking Mr X’s application did not meet the requirements of a statutory transfer value (because he had not nominated a scheme that was willing and able to take the transfer), the Ombudsman was of the view that had ITSL responded to his request, Mr X would then have been able to make a full transfer request and would have acquired a statutory right to a cash equivalent transfer value.
ITSL has been directed to provide Mr X with a CETV to a named scheme that is prepared to accept it within 14 days. ISTL must now pay the transfer value to that arrangement, being the higher of the CETV as at 20 September 2013 plus interest and the correctly calculated CETV at the date of payment. The Ombudsman made this direction “without any great confidence that it will be completed immediately”, and went on to note that “If ITSL do not comply, Mr X may attempt to enforce the direction through the courts, but sadly even if ITSL respond he may find that some or all of the money is no longer there”.
Pension liberation has been on the rise in recent years, with some 140 complaints now before the Pensions Ombudsman. The vast majority of these complaints (nearly 90%) are from individuals whose pension provider has not allowed a transfer because the provider believes that its purpose is pension liberation. Most of these relate to just two receiving schemes.
The remaining complaints are from individuals who have transferred their benefits and either:
Commenting on the Capita Oak Scheme, the Ombudsman noted that it “is of a type that is designed to avoid regulatory obligations that would otherwise limit scope for abuse and/or bad advice. [Mr X] apparently [transferred his benefits] in search of high investment returns and with the inducement of a cash sum. I do not know what has happened to the assets he transferred. They may or may not be secure, though he is very rightly concerned that they are not”.
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