Issues affecting all schemes

Pension transfers – trustee duties

The Pensions Ombudsman has decided that a scheme administrator's failure to send the Pensions Regulator's "Scorpion" leaflet to a member requesting a transfer, and to carry out proper due diligence checks on a receiving scheme which turned out to be a suspected scam vehicle, amounted to maladministration.

The Ombudsman concluded that, had the administrator provided the member with the "Scorpion" leaflet, and had it acted more diligently, on the balance of probabilities the member would not have proceeded with the transfer. The Ombudsman therefore directed the administrator to reinstate the member's benefits in the transferring scheme (subject to the administrator having a right to recover from the member any amounts that the member might retrieve from the receiving scheme).

For more information, please see our legal update.

Action

Schemes should ensure that, when processing transfer requests, they consider whether the proposed receiving scheme raises potential "red flags", and should bring any concerns identified through those checks to the member's attention and provide appropriate information on the risks of pension scams.

Distribution of death benefits – giving reasons

The Pensions Ombudsman has decided that, although a scheme administrator had taken all relevant factors into account when reaching its decision on distribution of death benefits, its failure to explain its reasons or rationale for its decision amounted to maladministration. The Ombudsman concluded that the absence of any documented reasons to support the administrator's decision (beyond the list of factors considered) indicated that there were no supportable reasons for the decision.

The Ombudsman added that documented reasons need not be lengthy, but should be sufficient to convey to the reader an understanding of the factors which have been given some weight. It may also be appropriate to record why some factors have been discounted. The reasons should be sufficient to enable an aggrieved party to know whether there are grounds to challenge the decision.

Action

Schemes should be ready to give reasons for the exercise of discretions about payment of death benefits.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.