Pension Liberation – The case study of Mr N

Mr N complained that the Northumbria Police Authority (the Authority) had transferred his pension fund from the Police Pension Scheme (the Scheme) to a new pension scheme without having conducted adequate checks in relation to the receiving scheme and had failed to provide him with a sufficient warning, as required by TPR, against transferring. Mr N was concerned that his entire pension fund may have been lost or misappropriated.

Mr N wanted to access his pension before the Scheme’s normal retirement age and therefore he sought advice on the possibility of transferring to a pension provider which would let him access his pension at age 55. In August 2013, he obtained advice, via an unregulated introducer, from a firm of financial advisers. He subsequently transferred £112,077.66 in August 2014 to the London Quantum Retirement Benefit Scheme (London Quantum), which appeared to be a defined contribution occupational pension scheme.

The sponsoring company is now in liquidation and TPR appointed an independent trustee (the Trustee) in June 2015. The Trustee indicated that actions taken by the former trustee may have been in breach of trust, and members of London Quantum may have suffered a loss as a result.

In 2016, Mr N complained to us about the Authority. The Ombudsman decided to hold an oral hearing to assist him in determining whether Mr N would have transferred anyway, regardless of any further intervention by the Authority, or the provision of TPR’s action pack.

The Ombudsman noted that Mr N’s transfer request had been received by the Authority nine months after TPR’s pension liberation fraud guidance of February 2013 had been issued; and his transfer was completed in August 2014. He referred to a number of previous Ombudsman Determinations, in which it had been stated that February 2013 had marked a point of considerable change in the level of due diligence expected of trustees, managers and administrators when considering transfer requests. He commented that the overriding consideration for a scheme trustee or administrator must be to evaluate the transfer application carefully in order to comply with a valid statutory transfer right and to withhold legitimately an invalid transfer application. He concluded that the type of analysis contained in those previous Ombudsman Determinations and expected by TPR, and subsequently seen in practice in the industry, had not been present in the Authority’s actions in Mr N’s case.

The Authority sought to rely on the statutory discharge of the Pension Schemes Act 1993 on the basis that they had done everything that was needed to carry out the transfer. However, the Ombudsman disagreed and found that the Authority had failed to undertake an appropriate review of the transfer application, taking into account the law and regulatory guidance and had not carried out reasonable checks of the receiving scheme. The Ombudsman was also satisfied that, on the balance of probabilities, had the Authority acted more diligently, Mr N would not have proceeded with the transfer and suffered the subsequent loss.

The Ombudsman upheld Mr N’s complaint and directed the Authority to reinstate Mr N’s accrued benefits in the Scheme; or if that was no longer possible, provide equivalent benefits, adjusting for any revaluation since the transfer. The Ombudsman also directed that the Authority would be entitled to recover from Mr N any amount of his pension fund that the Trustee was able to retrieve from London Quantum. The Authority was also directed to pay Mr N £1,000.  

Related determinations

• The Police Pension Scheme (PO-12763)