The Pensions Ombudsman has dismissed two complaints by the same member against providers who made transfers to a receiving scheme where the member lost the entire value of the funds transferred (Mr S CAS-50392-S0T8 and CAS-50391-H3V6).

Background

Mr S was approached in 2016 and encouraged to transfer his pension arrangements to the Optimum Retirement Benefit Plan (the "Receiving Scheme").  At that time Mr S had pension arrangements with three different providers ("Provider A", "Provider B" and "Provider C") and he made transfer requests to all of them.  

Provider A sent Mr S a copy of the Pensions Regulator's Scorpion leaflet warning about pension scams.  Provider B recommended that Mr S should consider taking advice from an FCA-registered adviser and made reference to the Scorpion leaflet as well as information on its website about pension liberation and investment fraud.  Provider C did not send Mr S a copy of the Scorpion leaflet, as its policy was only to send the leaflet if its due diligence unearthed something suspicious or it was told that the member had been cold called by an unregulated company.

Providers B and C actioned Mr S's transfer request in October 2016.  Provider A subsequently wrote to Mr S saying that having reviewed information provided to it about the Receiving Scheme and the response it had received from HMRC, it was unable to agree to the transfer request.

The Ombudsman's conclusions

The Ombudsman was highly critical of Provider C's failure to send the Scorpion leaflet or make additional enquiries.  He said that in 2016 Provider C should either have had a process in place to issue the Scorpion leaflet to all members who requested transfer paperwork or should have contacted members directly to ask questions to satisfy the initial analysis outlined in the 2015 Code of Good Practice on combating pension scams.  Nevertheless the Ombudsman did not uphold Mr S's complaint against Provider C as he noted that Mr S had been directed to warning information, including the Scorpion leaflet, by the other providers.  He therefore considered it unlikely that a further Scorpion leaflet issued by Provider C would have caused Mr S to act differently.

The Ombudsman also dismissed Mr S's complaint against Provider B.  A key aspect of that complaint was that Provider B should not have relied on evidence of the Receiving Scheme's HMRC registration provided by the Receiving Scheme and should instead have asked HMRC to provide positive confirmation of the registration status of the Receiving Scheme.  The Ombudsman rejected this argument.  The Ombudsman referred to the 2015 Code of Good Practice which strongly suggested that pension providers were "entitled, and encouraged" to accept information relating to a receiving scheme's status from other entities provided that no risk had been identified and sufficient due diligence carried out.

Our thoughts

It appears that it was fortunate for Provider C that Mr S had received scam warnings from his other two pension providers, thus leading the Ombudsman to conclude that Mr S would not have acted differently had he received the Scorpion leaflet from Provider C.  Had Mr S not received warnings from his other providers, it appears that the Ombudsman might well have upheld Mr S's complaint against Provider C, as he concluded that Provider C's due diligence was not sufficient to comply with industry standards in 2016.

In dismissing the complaint against Provider B, the Ombudsman appears to have attached considerable weight to the 2015 Code of Good Practice, whilst acknowledging that this is not a statutory code.

Under the current law, the absence of an employment link with the Receiving Scheme would have been an "amber flag", meaning that Mr S would have been required to take mandatory scams guidance from MoneyHelper before taking a transfer.