Pensions - Articles - High Court pensions ruling leaves pension savers vulnerable

The lawyer advising on a landmark pensions case has warned that pension savers will be exposed to scams following a High Court ruling today which has tested the rules governing the ease with which funds can be transferred to new schemes.

 The case, Hughes v Royal London, centres on a pension transfer request made in 2014 to a new scheme. The dispute arose after Royal London refused the request on the grounds of concerns about the status of the scheme and Ms Hughes’ right to transfer her pension into it. Ms Hughes contested the decision by complaining to the Pensions Ombudsman. His determination, in favour of Royal London, has now been successfully appealed to the High Court.

 Legal experts say that the judgment, in favour of Hughes, could give rise to further marketing of dubious schemes on the basis that the legal basis for declining transfers has been brought into question.

 Lead legal advisor to Royal London, pensions litigation partner at Pinsent Masons, Ben Fairhead, said: “The consequences of this ruling are far reaching and could leave pension scheme members more exposed to the risk of scams. It will now be far easier for individuals to move their money from legitimate schemes, ultimately leading to a potential influx of monies into suspicious schemes as the hands of those being asked to make transfers are increasingly tied by the inflexibility of the law. 

 This decision lays bare the problems facing pensions providers and trustees grappling with the rise of such scams. They are effectively tasked by the Pensions Regulator and the FCA with trying to prevent pension funds disappearing into scams. Yet they will be increasingly hamstrung without a legitimate legal basis for declining to make the transfers that ultimately enable the scams to take place.

 Put simply, until now it was common for a pensions provider to request proof of an earnings relationship between the individual and the provider for the potential new scheme. In the majority of circumstances most dubious schemes can’t satisfy this criteria, giving legitimate providers grounds to refuse transfers where they had reservations about individuals opening themselves up to potential scams. This judgment removes that obstacle, leaving pension holders vulnerable.

 "In many ways this decision simplifies the law for pensions providers who have been struggling with burdensome processes to decide whether to facilitate transfers where there are scam concerns. However, it also creates a great deal of uncertainty in the battle against pension scams.

 "Barring a change to the law – which would be far from straightforward - or more decisive action being taken by government agencies to clamp down on suspicious schemes and the perpetrators, all the pensions industry can do for the moment is continue to warn the public. Inevitably, in the meantime, scope very much remains for unscrupulous individuals to target and exploit those desperate for cash or enticed by the prospect of implausibly high returns on investments.”

Back to Index

Similar News to this Story

Royal London offer actuarially fair exchange for guarantee
According to FCA estimates, over half of savers with ‘guaranteed annuity rates’ attached to their pension pots are throwing them away in retirement an
The key to pensions prosperity is earlier intervention
The Association of British Insurers (ABI) has today released a new report with a five point plan aimed at engaging consumers with their retirement opt
IFoA aims to help consumers make retirement saving plans
According to Institute and Faculty of Actuaries (IFoA) policy briefing, ‘Can we help consumers avoid running out of money in retirement?’ consumers sh

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS


Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.