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Landmark ruling orders transfer out of liberation scheme

The Pensions Ombudsman has ordered that a member be allowed to transfer out of a liberation scheme in the first ruling of its kind.

But despite the ruling, the member may not get any money back as the ombudsman has warned their entire pension savings could have already “disappeared”.

Pension liberation, also known as pension unlocking, involves a member transferring out a scheme and accessing their funds before the minimum retirement age of 55. Usually members’ savings are invested in unregulated and high risk assets.

In this case the client, identified only as Mr X, transferred almost £370,000 in June 2012 out of the defined benefit NHS Scotland scheme to the Capita Oka Pension Scheme. He was promised investment returns of up to 12 per cent by the Capita scheme, with the trustees taking a 5 per cent cut of Mr. X’s pension at the point of transfer.

The member signed a declaration stating he was aware of the implications of leaving the scheme and had read a factsheet on the risks of pension liberation.

He subsequently changed his mind but the trustees of the Capita scheme did not respond to his request to return his money.

The ombudsman ruled the trustees of the Capita Oak Pension Scheme had to pay Mr. X the transfer value of his fund as at 30 September 2013 plus interest but warned: “Mr X can enforce the direction in the courts, though the ombudsman noted that even if the trustee engaged with enforcement, Mr X might find that some or all of the money had disappeared.”

The Pensions Regulator recently announced it has shut down liberation schemes associated with transfers worth more than £134m. From April 2015 people who want to transfer out of defined benefit schemes will have to first speak to a regulated adviser.

Giving evidence to the Work and Pensions select committee today, The Pensions Regulator interim chief executive Stephen Soper warned firms offering liberation services are using the new Budget freedoms to tempt members to transfer.

He says: “At the dark end of the scale, we’re very alive to the fact the focus of people conducting scams could move. We have to be alert to what those new models look like and act jointly in a lot of cases to shut those down.

“We have had success in shutting those models down. Using the courts and making people aware of what the risks are.”

He adds: “The Pensions Ombudsman has been very supportive of the framework that we’ve created so far but that still doesn’t protect any of us form members who choose to move their money despite the warnings.”

“We’ve talked about the flavour of scams that might come from these flexibilities but, for obvious reasons, we’re not going to put across what those might be.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Jamie Smith-Thompson 18th December 2014 at 9:51 am

    Any clampdown on liberation schemes is good news, although unfortunately it remains likely that only a lucky few will see all their monies returned. Our understanding is that, if anything, liberation activity has increased in the run up to April. We would like to see the various government agencies making two things clear to those with pension savings: that regulated advice can keep people safe from these scams, and that the minimum age limit of 55 will remain once the upcoming pension freedoms take effect. And, of course, we need to see these liberation companies quickly identified and shut down.

  2. Bethell Codrington 18th December 2014 at 5:26 pm

    Without wishing to “rain on the parade”, there are some major hurdles still to overcome:
    Documentation re segregated accounts. In order for a ‘transfer out’ to even start, you need an initial opening account, which apparently do not exist.
    Assets. These need to be properly valued and liquidity determined. Capita Oak is a nightmare, with Store Pods bought on mass and questions over where the money is.
    Co-operation from the accountants and banks to ascertain recovery of unwarranted fees, commissions etc. and find out exactly where money was paid.
    Co-operation of the Trustees and those with signing rights over the assets. Need to determine actual ownership structure.
    Where recovery of assets may take some time through the Courts etc, how will this be apportioned upon success.
    Legal, Trustee and Accountancy fees to be agreed going forward. Power of appointment and removal.

    Whilst his is a major step in the right direction, it is just the first step, and a lot has yet to happen before anyone can transfer out in reality.

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