By Ben Fairhead, Partner at Pinsent Masons and a member of the Pension Scams Industry Group
Complaints against ceding schemes
One of the most obvious potential sources of redress is the scheme that enabled the transfer into the scam to go ahead.
There were initial shockwaves in 2018 from the Pensions Ombudsman's determination against the Northumbria Police Authority (Mr N, PO-12763) – the first significant finding of maladministration on the part of a ceding scheme trustee where an individual's pension had been transferred to a scam. However, there have been limited signs so far of the floodgates opening to similar claims.
The determination in Mr T/Prudential (PO-16475) has clarified that a three month timeframe from 14 February 2013 was deemed reasonable to allow trustees sufficient time to implement changes arising from the Regulator's scorpion campaign. Transfers post May 2013 are likely to be subject to much great scrutiny though, with expectation of red flags not being missed and appropriate warnings being given.
We saw this put into effect in the case of Mrs H and Hampshire County Council (PO-21489) involving a transfer made in November 2013. Unlike with Mr N, Mrs H had at least been sent a copy of the Regulator's scorpion leaflet prior to transferring – and she had even signed a declaration confirming she had read and understood it. Nonetheless, in making a maladministration finding, the Ombudsman attached weight to Mrs H's location being several hundred miles away from the "employer" for the receiving scheme, as well as her apparent lack of financial awareness.
Admittedly there was a quirk in this case of no statutory right to a transfer being considered to exist, meaning the Council had to apply its own discretion, but the determination points towards an expectation of much higher standards, come late 2013 and beyond, than mere provision of the scorpion leaflet.
We have yet to see more determinations like this, but it would be surprising if there were not others in the pipeline. With PPI claims concluding, claims management companies are seizing the opportunity to pursue complaints. Some will be misconceived, but there will no doubt be others that raise serious questions.
Recovery via the scammers
Equally, there is a degree of hope for members with signs of more criminal action being taken by the Pensions Regulator against pension scammers – and with a view to securing confiscation orders where possible. In fact, action has been taken in the past year against the trustee of the Focusplay Scheme into which Mrs H herself transferred her pension.
Alas, the threshold for pursuing such action is very high, and, in any event, pension scammers rarely have the means to compensate their victims in full.
Greater victim support needed
There are many individuals for whom recompense from ceding schemes or from the scammers is not viable. The Pension Scams Industry Group is encouraging more support for pension scam victims.
One particular step that has also been advocated is an amnesty on tax charges for those individuals who received payments from their pensions prior to any significant public awareness of the risks with pension liberation schemes. Provided individuals were genuinely not aware of the tax implications, there are likely to be a finite number who transferred into early pension liberation vehicles and have paid the price both in terms of losing a large part of their pensions as well as incurring tax charges of up to 55% of the cash received.
HMRC have their concerns about precedents and deterrence but there are sufficient checks and balances in the system now to guard against the sort of pension liberation schemes that proliferated in the early 2010's. A more compassionate approach is needed, especially in the difficult times facing us in the coming months.
More action to prevent current and future scams
The past year has not all been about looking back.
On the horizon are changes to the statutory right to a transfer, foreshadowed by reference to regulations that will be brought in once the current Pension Schemes Bill eventually reaches the statute books.
My concern here though is that we are playing catch-up with the scammers again – primary focus is likely to be on bringing in a "genuine employment link" between a transferring member and the employer of an occupational pension scheme, a fall-back to the legislative loophole identified in the Donna-Marie Hughes v Royal London case four years ago.
The intended changes do not look likely to do anything though to address present concern about what have been termed "international SIPPs". What we need is wider scope for the statutory right to be restricted, for example when certain red flags exist.
This need to stay one step ahead of the scammers is underscored by the fast developing situation with coronavirus. Already there are fears that fraudsters will prey on individuals in need of urgent cash - effectively a rebirth of pension liberation - as well as on the unpredictability of financial markets, with no doubt false promises of a better return if pension monies are transferred or withdrawn.
We have uncertain times ahead. Those grappling with transfer requests will need to take extra care and vigilance in the current climate if we are to avoid, by the eighth anniversary of the Regulator's scorpion campaign, a fresh wave of individuals falling victim to pension scams.
|
