Pension scams given green light by High Court ruling
A recent High Court judgement on a pension transfer request could 'open the floodgates' for pension fraud, according to pension scheme administrator Equiniti.
The fear is that as a result of the ruling, pension schemes will have no option but to agree to pension fund transfer requests made under the new rules that came in last April, even if they suspect the pension holder is being defrauded.
Research indicates that almost one in five over-55s believe they have been targeted by fraudsters hoping to talk them into transferring funds out of their pension under the new rules giving pension holders more control over their funds.
Equiniti points to the case of Hughes v Royal London, which went to the High Court after the Pensions Ombudsman turned down a complaint by Donna-Marie Hughes against Royal London, the administrator of her personal pension. She had gone to the Ombudsman after Royal London declined her request for a cash transfer from her pension.
The High Court had to decide whether Royal London was right to turn down Hughes's request to take cash from her pension, and found in favour of Hughes.
Typically, says Equiniti, the administrators will double check any request for a cash transfer, and refuse to release the funds if anything seems to be awry.
The company is concerned that the High Court's decision has effectively removed the 'checks and balances' that enable administrators to block transfers without fear of future sanction - even though the Ombudsman itself wants to keep them in place to protect pension holders.
Peter Scott, head of pension regulation and compliance at Equiniti Pension Solutions, says: '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 [to ensure any transfer request is checked and approved by the administrator].'
Mr Scott adds that the High Court's decision 'has deprived the industry of a valuable tool in the fight against pension scamming'.
He concludes: '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.'
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.