The Pensions Ombudsman has said pension trustees did not need to conduct due diligence on transfers out between February 2013 and November 2021, after a British Steel Pension Scheme member complained through a claims company despite having signed and returned a Scorpion leaflet. The comprehensive determination will guide the TPO’s future approach to such cases.

Ombudsman Dominic Harris – to whom the case was referred after the member’s representatives did not accept the adjudicator’s opinion – rejected Mr D’s complaint that B.S. Pension Fund Trustee Ltd should have undertaken due diligence on the receiving scheme before agreeing to transfer his £41,507.33 BSPS pension to a small self-administered scheme with Bespoke Pension Services Ltd. 

In the determination, the ombudsman considered “the trustee’s duty of care at that time” under the Pension Schemes Act 1993, and whether it was mandatory for the trustee to comply with the due diligence checklist set out in the Pensions Regulator’s 2013 action pack, ‘Pensions liberation fraud: The predators stalking pension transfers’ or the Scorpion leaflet.  

“These areas of law were examined in detail and the Pensions Ombudsman found that there was no general, common law or equitable duty of care that required the trustee to conduct the due diligence suggested by Mr D and his representative,” TPO said. 

TPO noted that the trustee had not voluntarily assumed responsibility to investigate the receiving scheme and had not made any promise or implied representation to Mr D that it was conducting due diligence which he could argue that he then relied on. 
 
The ombudsman called the determination an important legal assessment of a trustee’s duty of care in statutory transfer requests from February 2013 until the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 came into force on 30 November 2021.

“Although each case turns on its own facts, it is likely to inform TPO’s approach to similar cases,” TPO said. 

Determinations setting out TPO’s view of the position in respect of transfers made from personal pension schemes – which fall into the Financial Conduct Authority’s regulatory remit – or where a non-statutory transfer is being considered “will follow in due course”, it added. One part of Mr D’s claim revolved around whether TPO should take an approach that is different to the one adopted by the Financial Ombudsman Service in such cases, with Harris arguing that the rules for occupational schemes were different and could, therefore, lead to differing decisions. 

Harris’ decision marks a departure from TPO’s previous approach in a controversial determination from 2019. His predecessor Anthony Arter decided then that Hampshire County Council had to pay damages and reinstate Mrs H, who had transferred into a fraudulent scheme in 2013, despite the council having sent the Scorpion leaflet to her.  

Unlike Harris, Arter had come to the conclusion that the creation of the Scorpion leaflet and action pack in February 2013 meant that requirements on schemes to check transfers had ramped up.   

 

   

Similarly, Arter was of the view that Royal London was right to block a suspicious transfer in a 2015 decision. However, Mrs Hughes appealed, and in 2016 the High Court ruled that Royal London was wrong to block the transfer, allowing it to go ahead. This ruling effectively tied trustees’ hands when it came to protecting members from suspicious transfers until the 2021 regulations were introduced.  

This is the most legally comprehensive determination by TPO in a transfer complaint, found Sackers partner Peter Murphy. 

  

He argued that this determination sets the bar for a successful claim by members even higher than before – which had tested trustees’ conduct against “the standard of the day”. 

  

TPO not only decided that the trustees had no legal duty to undertake due diligence nor had they done so voluntarily, but the ombudsman “also made clear that, even if the trustee had engaged further with the member about his requested transfer, his view was that the member would still have required the trustee to proceed with the transfer,” Murphy explained.  

 

“Subject to any appeal that the member might bring, TPO’s determination provides welcome clarity as to the duties of occupational pension scheme trustees dealing with requests for statutory transfers during the period from February 2013 – November 2021,” he said. 

  

Murphy added that while some might consider the decision to be harsh, it will be a relief to many trustees who have felt that they have been asked to fulfil “an almost impossible task” when faced with requests for statutory transfers out of their pension schemes. 

 

Trustees who hesitate to transfer risk accusations of delay, but where the transfer results in negative financial consequences for the member, the trustee risks being accused of breach of duty “made with the benefit of hindsight”, said Murphy, noting that as with Mr D, such claims are often made through a claims company. 

 

Margaret Snowdon, who chairs the Pension Scams Industry Group said PSIG has long been concerned about the likelihood that claims management companies would “see an opportunity to pursue spurious claims against schemes who permitted statutory transfers to go ahead”. 

 

Had the trustees refused Mr D’s request to transfer, this would likely have resulted in a complaint and the trustee would have been found wanting, she agreed with Murphy. 

  

Snowdon said the publication of the PSIG Code of Good Practice in 2015 and the 2021 regulations giving trustees powers to stop suspicious transfers have been positive developments since then.  

 

She added: “What we would like to see is greater focus on prosecuting the enablers of scams.” 

 

It could be argued that the lack of acknowledgement of the 2013-2021 protection gap is a weakness of the current system, with no mechanism to provide redress to victims who suffered a loss during that period, said Loren Ward, an associate at Norton Rose Fulbright. 

 

“However, we think it is very unlikely that a retrospective change would be made to the legislation, which would not be fair on schemes, trustees and administrators,” she said. 

She expects a number of pension scam claims relating to the 2013-2021 period to surface in future, given the lack of protection for transferring members during that time. 

 

However, Ward noted “some evidence of resistance to growing compensation culture” given TPO’s reliance on Phillipp v Barclays Bank UK [2023] UKSC 25, and the reference to fraud losses as “a question of social policy for regulators, government and ultimately parliament to consider”. 

  

She also thinks it possible that regulatory resistance to compensation culture will intensify, adding: “We do think that TPO’s decision is correct.” 

  

Mr D, a member of the former BSPS scheme, had requested transfer value quotes via three different firms in 2013. In 2014, via an unregulated fourth adviser, he decided to transfer his pension to a new scheme and invest in a fractional share of an overseas hotel resort, having been persuaded that this would benefit him more than his DB pension. The BSPS administrators sent the transfer value pack, which included the Pensions Regulator’s Scorpion leaflet warning about scams. 

The transfer request sent by Bespoke included the returned Scorpion leaflet, signed and dated by Mr D as having been read. In addition, a typed letter signed by Mr D stated that he was aware of “the issues relating to pensions liberation”. Mr D then became trustee of his SSAS, with Bespoke as administrator. 

In 2020, Money Redress Ltd complained on Mr D’s behalf via the scheme’s internal dispute resolution procedure, saying the trustees should have seen and made Mr D aware of scam warning signs. They cited signs such as Bespoke not being regulated, the fact Mr D was contacted by cold call and that the investment was non-diversified, unregulated and high risk. In 2020, £35,552.31 of Mr D’s money was held as an investment in The Resort Group.