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Industry wary of boost to Ombudsman’s legal powers


The industry has backed the Pensions Ombudsman taking a more active role in pension disputes that reach the courts but raised concerns about how it will use its greater legal powers.

Last week the Ombudsman announced it will move from being party to an appeal to taking a bigger role in legal decisions that impacted the wider pensions industry, such as pension liberation and auto-enrolment.

The move comes after the High Court controversially overturned a previous Ombudsman ruling regarding a suspicious pension transfer.

The Ombudsman had ruled Royal London was right to block the transfer, if it suspected this was a scam. But this was challenged by the client whose case was upheld by the High Court in February.

Pinsent Masons head of pensions Robin Ellison says: “This decision seems to be a sensible response to dealing with what may have been an unhelpful decision in the High Court in this case.

“This may be because the judge followed the letter of the law, rather than looking at the public policy issues. If the Pensions Ombudsman had been able to explain the background of his decision, it may be the judge would have come to a different outcome.”

But Ellison says he also has reservations about boosting the Ombudsman’s legal powers.

He says: “The reason why the Pensions Ombudsman has been reluctant to get involved in court cases in recent years has been because during the office of previous incumbents they overdid it.

“It’s a temptation for an ombudsman to try and defend his decisions. But you do not find a lower court judge turning up at the court of appeal to justify his previous decisions. It would be absurd – and add to expense as well.”

Rowley Turton director Scott Gallacher says it made sense for the Pension Ombudsman to take a more hands-on role, particularly when it comes to potentially harmful pension transfers.

But he adds: “Rather than increased scrutiny on the ceding scheme, it would be better if there was tighter regulation of these receiving schemes.

“Perhaps if they offered any investments that weren’t standard insured funds these transfers could fall under the ‘safeguarded benefits’ rules. This would require customers to seek independent advice on transfer over a certain size, and provide an additional layer of protection for consumers.”

Ellison agrees more should be done to tackle the pensions fraud.

He says: “It seems pretty rough on insurers and pension fund trustees to have to police pensions liberation cases when regulators, principally the FCA, are timid in pursuing wrongdoers.

“The real fault seems to be with lazy regulators, who prefer to impose detailed rules on financial services companies, rather than protect the public against real fraud.”

The Royal London case

Recent legal argument has centred on whether pension providers have a right – or duty – to block transfer requests if they suspect these may be part of a scam.

Pension freedoms has led to an increase in the number of unregulated firms offering unsolicited pensions “advice”. Some of these schemes are scams, while others seek to persuade pensions savers to put their money into highly risky and often unregulated investments.

To date the Pension Ombudsman has sided with the pension providers, and has failed to uphold a number of customer complaints about these blocked transfers.

But in a landmark ruling earlier this year High Court overturned this view. The case was brought by Donna-Marie Hughes who challenged Royal London after it blocked an £8,000 transfer into a SASS.

Royal London argued the transfer was suspicious, and as Hughes did not have sufficient relevant earnings she did not have the statutory right to transfer.

The High Court disagreed, and much of the legal argument centred on what were “relevant” earnings in this case.

At the time many legal experts said this judgment put pension savers at increased risk of pension liberation scams.

Royal London said: “Pensions liberation and pensions fraud raise serious concerns for providers. We therefore take transfer requests very seriously and look out for the warning signs highlighted by the regulators and relevant guidance.

“In spite of what we might find, if a customer has a statutory right to a transfer then there is very little we can do if the customer wants to proceed.”



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  1. “Some of these schemes are scams, while others seek to persuade pensions savers to put their money into highly risky and often unregulated investments.”

    Read: All of these schemes are scams.

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