The trail of despair that the pensions liberation industry is leaving in its wake continues to grow, in spite of one potentially encouraging determination of the Pensions Ombudsman.
It's fair to say that despite the best efforts on the part of the Government, the practice of "pensions liberation" has left a trail of despair amongst a significant number of UK pension savers who were lured in by the promise of high investment and returns and/or early access to pension benefits.
The battle against those operating and promoting pension liberation schemes continues. The Pension Regulator's "scorpion" campaign, which kicked off in February 2013, has been cited as an important point of change in making members and trustees aware of the pitfalls of liberation. Nonetheless, continued vigilance and education is needed not least because of the pension flexibilities which have now opened up post April 2015.
In this vein, a recent determination from the Pensions Ombudsman provides a glint of hope for those who have suffered at the hands of pension liberators. The determination involved a member (Mr Crossland) successfully arguing that his benefits should be transferred from a scheme (the Henley Retirement Benefits Scheme ("HRBS")) suspected of being used for so called "pensions liberation".
Pensions legislation is designed to prevent access to pension funds before the age of 55 (other than on ill-health or following death) as part of a policy that encourages pension saving by giving tax advantages, with penalties if the advantages are abused by using funds other than for authorised purposes.
Pensions liberation involves a transfer away from a genuine pension scheme to an arrangement that promises benefits before age 55. This is obviously contrary to the broad policy of encouraging pension saving and is of concern to both the regulatory and tax authorities.
The right to a transfer value
Section 94 of the Pension Schemes Act 1993 ("PSA 1993") gave members a statutory right to take a transfer value out of a scheme when their pensionable service concludes, provided that certain conditions are met.
A member must make an application in writing to the scheme trustees requiring them to use the transfer value in one of several ways. These include acquiring transfer credits or rights in another occupational or personal pension scheme; the trustees or managers of which are able and willing to accept payment in respect of the member's accrued rights.
If trustees receive an application that fulfils certain criteria they are required to do everything that is needed to effect the transfer within six months of the date they receive the application, or the date the member attains normal pension age, if that is earlier.
Mr Crossland and the Henley Retirement Benefit Scheme
In 2013 Mr Crossland sought advice on his current pension plans from a firm that expressly stated that it was not providing financial advice and was not regulated by the Financial Conduct Authority. As a result of this advice he transferred his benefits from two reputable, established schemes into the HRBS.
The trustee of the HRBS, Omni Trustees Ltd ("Omni"), confirmed in correspondence to Mr Crossland that it had received two transfers totalling £100,708.84 (less a charge of £1,800). Omni also stated that the HRBS is an occupational pension scheme.
Mr Crossland told the Ombudsman that he was subsequently unable to obtain any more information about his HRBS pension. As a result he wrote to Omni in March 2014 requesting a transfer value, although at this stage he did not give the name of the scheme to which he wanted to transfer. He then made a further transfer request on 3 June 2014 asking to transfer his benefits to a named occupational pension scheme. Mr Crossland was not employed by an employer in relation to this scheme.
Mr Crossland submitted to the Ombudsman that Omni had ignored his requests to transfer his benefits from the HRBS. Omni ignored the Ombudsman's request for submissions save as for an email dated 18 June 2014 in which they stated that they were liquidating the HRBS assets to comply with Mr Crossland's request and requests by other members. Then in November 2014 Mr Crossland received a letter from the trustee of a small self-administered scheme ("SSAS") making reference to a transfer of the HRBS assets to the SSAS. Mr Crossland claimed that he had no knowledge of the SSAS, the reason for the transfer or whether it included his fund.
The Ombudsman's decision
The Ombudsman said that although transfer requests made by Mr Crossland to Omni were not in the proper form, he would have acquired a statutory transfer right had he later submitted a full transfer request. It was only due to the "maladministration" on the part of Omni, who did not respond to Mr Crossland's letters, that this did not occur.
The Ombudsman stated that Mr Crossland should "take advice of a person authorised by the Financial Conduct Authority" before submitting his next transfer request. The Ombudsman went on to say that he "strongly recommended" that Mr Crossland's next transfer application "should be to a pension arrangement of which the provider is regulated by the Financial Conduct Authority or to one that is directly related to active employment".
The Ombudsman was adamant that to do otherwise would leave Mr Crossland vulnerable to a repeat experience. The Ombudsman concluded that "within 14 days of Mr Crossland requesting a transfer value to a named scheme that meets the prescribed requirements under legislation and is prepared to accept it, Omni are to pay the transfer value to that arrangement".
Whilst the decision is not surprising, the question remains as to how useful it will actually be given the doubts expressed by the Ombudsman as to whether Mr Crossland's money is still in the HRBS.
The HRBS and Omni have been the subject of extensive media coverage – a point noted by the Ombudsman in his determination. The Ombudsman was not concerned by the legitimacy of the HRBS but he did go so far to state that the HRBS was a scheme "of a type that is designed to avoid regulatory obligations that would otherwise limit scope for abuse and/or bad advice" and that there was "little doubt that it was against his best interests" to transfer his savings away from "two reputable established schemes".
Most recently, on 3 June 2015 Omni was put into provisional liquidation following an application by the Insolvency Service. This action should give Mr Crossland and other members of the HRBS some comfort that their assets will not be moved out of the HRBS. In addition, the Pensions Regulator is to appoint independent trustees to manage the assets.
However, what this action does not do is guarantee that all affected members will get their money back. If the people behind the HRBS have misbehaved then no doubt the authorities will take steps to track down the individuals and do their best to recover monies and assets on behalf of the aggrieved members. But, of course, if the assets are simply no longer there, the members in question will continue to suffer.
The difficulty with the situation which Mr Crossland and countless others find themselves in is that many take the decision to transfer to the HRBS of their on own accord. How far should the authorities go in insisting that anyone contemplating a transfer take FCA regulated advice? The April 2015 flexibilities will no doubt throw up many challenges for pension savers who do the wrong thing and/or are taken advantage of by unscrupulous operators.
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