Schemes will now find it extremely difficult to prevent pension transfers to any registered pension scheme - regardless of whether they think it is a potential scam.
In the case of Hughes v Royal London* the High Court has effectively overruled the Pensions Ombudsman’s determination to give pension administrators the ability to block transfers in certain circumstances without fear of future sanction.
As a result it has potentially made it easier for unwary pension members to fall prey to criminal pension scammers.
Peter Scott, lead pensions specialist with Equiniti Pension Solutions: “This decision to overrule the Pension Ombudsman has come as a major blow to pension schemes and their administrators, many of which had restructured their anti-scamming processes in the light of the Pensions Ombudsman’s determination.
“In our view, the High Court’s decision has deprived the industry of a valuable tool in the fight against pension scamming and has further stretched the meaning of an occupational pension scheme. Not for the first time, we have to ask ourselves if the only way to bring an effective end to the pension scamming phenomenon is for fundamental changes to be made to the legislation underlying the transfer process.”
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Notes to Editor:
The case of Hughes v Royal London*
The legal case and judgement concerned an appeal by Ms Hughes against an earlier determination (June 2015) of the Pension Ombudsman who had ruled that she did not have a statutory right to transfer her benefits to her chosen arrangement as she was not “an earner” for the purposes of the transfer legislation as she was not in receipt of earnings from an employer connected to that arrangement. Although the legislation does not specifically state that earnings for these purposes have to come from such an employer, the Pensions Ombudsman took the view that it would very strange if they did not.
Upholding Ms Hughes’ appeal, Mr Justice Morgan held that, in the circumstances, it was not open to the Pensions Ombudsman to read additional words into the legislation and, as such, a general meaning had to be given to the word “earner”. Consequently, as Ms Hughes was in receipt of earnings from other sources, she was “an earner” and had a statutory right to transfer. The Pensions Ombudsman has announced that he does not intend to appeal the High Court’s decision.
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