High Court rules on key 'pension liberation' case

In July the Court was asked to clarify the legal status of a number of schemes linked to high profile police raids carried out earlier this year targeting suspected 'pension liberation' schemes.

Specifically, the Court was asked to rule on the critical question of whether the schemes should be treated as 'occupational' pension schemes, in order to assist the trustees in determining how those schemes should be administered going forward as well as to assess whether their appointments as trustees by the Pensions Regulator were valid.

In a 42 page judgment handed down today, Mr. Justice Morgan ruled:

"In the end, I have concluded that the purpose of the scheme as expressed in the language of the scheme...satisfies the purpose test in the definition of occupational pension scheme."

Parties involved in the case say that the decision to treat the schemes as occupational pension schemes is significant as it clarifies the powers The Pensions Regulator can use in relation to such schemes.

Brian Spence, a director at Dalriada Trustees Limited - which was appointed by The Pensions Regulator to administer the schemes in question, and subsequently by the Court to present arguments in favour of the schemes being occupational pension schemes - says:

"As has been made clear by the trustees and the Regulator throughout, this was a question of resolving an uncertainty about the status of the schemes, with the parties not in dispute but adopting the opposing arguments to ensure a fair and robust legal process. Independent trustees like Dalriada and the Regulator are united in fighting against pension liberation and all of the misery it brings.  It remains a real problem but we will continue to find means of dealing with those behind these schemes." 

Katharine Davies, a Partner at Pinsent Masons, which put together the legal case on behalf of Dalriada, says:

"These proceedings have been of huge interest to trustees and the wider pensions industry, and the decision helpfully clarifies this important issue. While clearly not condoning pension liberation, the Court has clearly recognised that the schemes involved are occupational, which by implication affirms the Pensions Regulator's capacity to appoint independent trustees to oversee dubious schemes.  It is surprising that it has taken some time  for this definition (from the Pension Schemes Act 1993) to be tested in this way."

'Pension liberation' has been of increasing concern to the UK authorities with the FCA, HMRC and The Pensions Regulator all warning consumers of significant risks.

Under such arrangements, individuals are encouraged to transfer to schemes in the expectation of getting early access to their pension fund (before the minimum retirement age of 55), either by way of a loan or some other form of cash inducement.

However, such payments are likely to be in breach of the rules governing occupational pension schemes and can expose members to potentially significant tax charges.

In May, City of London police carried out a series of raids on organisations accused of involvement in such schemes.

Dalriada Trustees Ltd has been appointed as an independent trustee to assume responsibility for the day-to-day management of a number of these suspected liberation schemes.

The schemes under scrutiny in these proceedings are believed to have some 450 members with original transferred funds amounting to a sum in excess of £15 million. Pending the progress of police enquiries no further contributions or transfers-in are being accepted into the schemes in question, and no payments are being made to or in respect of members of the schemes.

The schemes involved are: Ironstream; Chappell Crest Retirement Benefits Scheme; Herman and Peters Retirement Scheme; Gary Peak Retirement Benefits Scheme; Talton Management Ltd Pension Trust; Strator Services Ltd. Pension Trust; Rotinar Ltd. Pensions Trust and Fairdon Services Ltd. Pension Trust.