Pension liberation transfer - The case study of Mr S

Mr S complained that the Ministry of Defence (MoD) allowed him to transfer from the Armed Forces Pension Scheme (AFPS) to the Capita Oak Pension Scheme (the Receiving Scheme). The Receiving Scheme was operated by Imperial Trustee Services Limited, which had since been forced into compulsory liquidation and Mr S believed his benefits had been lost.

The Pensions Ombudsman held an oral hearing as part of his investigation into Mr S’ complaint. He considered this necessary to hear the evidence of the parties regarding the sequence of events leading up to the transfer of Mr S’ benefits. Both parties attended the oral hearing and gave evidence.
In January 2013, MoD received a request to transfer Mr S’s benefits. Legislative provisions provide that to acquire a right to benefits under the Receiving Scheme Mr S had to be an “earner”. 

In February 2013, TPR issued guidance about pension liberation and the danger of pensions scams. MoD claimed it was not aware of TPR’s guidance until October and did not put the guidance into practice until November 2013.

MoD argued that its due diligence into Mr S’ transfer request was completed in March 2013, reflecting the law and regulatory guidance as reasonably known to itself at the time. As part of this, MoD checked that the Receiving Scheme was registered with HMRC, which it had been in July 2012, as an occupational pension scheme established in Cyprus. 

The transfer was not made until September 2013, mainly due to delays by Mr S in providing sufficient proof of identification. When sending proof of identification, Mr S sent evidence that he was receiving Jobseeker’s Allowance. 

The complaint was upheld by the Pensions Ombudsman because Mr S’ unemployed status meant he was not an “earner” for the purpose of acquiring a right to benefits under the Receiving Scheme, meaning he did not have a statutory right to transfer. As the AFPS did not have a separate discretionary transfer power, Mr S’ transfer was invalid and MoD’s obligations under the legislation were not discharged. 

The Pensions Ombudsman also found that there was maladministration by MoD in failing to assess the transfer request in accordance with TPR’s guidance and failing to warn Mr S of the concerns MoD should have had as a result. Had MoD followed the guidance, it would have raised several red flags, including:

• the Receiving Scheme was recently registered
• it was established in Cyprus, geographically distant from Mr S’ residence
• Mr S was approached through an unsolicited phone call.

However, on the balance of probabilities, the Pensions Ombudsman did not find these failures would have affected Mr S’ decision to transfer (had the transfer been legally valid).

The Pensions Ombudsman directed MoD to reinstate Mr S in the AFPS. Mr S was also awarded £2,000 for severe distress and inconvenience caused by the maladministration.