Friday, May 29, 2020

Ombudsman Rejects Another Pension Liberation Complaint

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The Pensions Ombudsman has reinforced previous rulings that bar retirement savers trying to win compensation after they have lost money in a pension liberation scam.

Victims of pension liberation scams have complained to the ombudsman claiming their former provider should have checked that they were transferring the cash to a reputable scheme.

The aim is to show the former pension provider was negligent, opening the way for action to win compensation from the transferring scheme.

In the latest ruling, the ombudsman decided Royal London had no duty to investigate whether the Capita Oak scheme was a genuine pension.

The retirement saver making the complaint, referred to as ‘Mr T’, switched £112,541 from Royal London to Capita Oak in 2012. The scheme has stopped trading and is insolvent.

Consumers unlikely to win

The ombudsman ruled that Royal London had no evidence or specific concerns that stopped the firm transferring Mr T’s pension to Capita Oak.

Pension lawyers argue that consumers are unlikely to win cases before the ombudsman that involve transfers to pension liberation schemes made before February 2013.

Then, The Pension Regulator started a campaign warning providers and consumers against switching funds to a suspected pension liberation scheme. Until then, the regulator did not insist the transferring scheme carried out any due diligence about the receiving scheme.

A landmark court case in the High Court earlier this year has also ruled that pension providers had no duty to warn customers that their money was at risk when transferring to another scheme. The court found that that rules governing pension transfers offered providers no legal justification to hold up switching money.

Suspected pension scams

“The determination is consistent with the ombudsman’s approach to date when considering maladministration claims against providers who allowed transfers to schemes that have turned out to be suspected pension scams,” said Ben Fairhead of law firm Pinsent Masons.

“The determination is the first to consider the impact of the court ruling, which makes it more difficult for a provider or trustee to find legal justification to decline to make a transfer, even where a pension scam is suspected.”

The clear message the ombudsman and courts are sending to consumers is that if they lose money when transferring their retirement savings to a dubious scheme, then the responsibility for the loss lies with them and not the transferring provider.

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