TPO upholds pension transfer complaint against Teachers’ Pensions

Ben Fairhead of Pinsent Masons said pension firms should pay close attention to the ombudsman’s conclusion that TP did not conduct sufficient due diligence checks when transferring the complainant’s pension benefits from the Teachers' Pension Scheme (TPS) to the London Quantum Pension Scheme (LQPS).

TPO also found that TP failed to warn the complainant, referred to as ‘Mrs G’, of the potential consequences of transferring her pension. He concluded that Mrs G would have been unlikely to have proceeded with the transfer if she had been properly warned. He directed TP to reinstate Mrs G’s accrued benefits in the TPS, and to account for any revaluation that would have taken place since the transfer took place.

Fairhead said: “This is a significant decision from the outgoing ombudsman with a careful weighing up of the steps taken by the trustees when processing the transfer and the standards that would have been expected at the time. It has evidently been considered in detail including use of an oral hearing. Being a 2015 transfer, the bar has been set higher as awareness of pension liberation and scams had grown markedly from 2013 when the regulator’s scorpion campaign was first launched.”

In January 2015, Mrs G applied to transfer her TPS pension to LQPS. While the provider of two of Mrs G’s other pensions, which she also applied to transfer, flagged concerns about LQPS, TP did not. When Mrs G complained, TP stated that it had undertaken “adequate” checks prior to the transfer and had no reason to stop her from exercising her right to transfer.

After an oral hearing to gather more information, TPO concluded that TP's failings amounted to "serious maladministration", directing TP to pay Mrs G £1,000 for the “serious distress and inconvenience” she suffered. He said TP should have spotted the “clear red flag” that Mrs G had applied to transfer her pension to another occupational scheme, sponsored by a geographically distant company that she did not work for.

Fairhead said: “There remain a number of complaints like these that are taking their time to work their way through the system, with a number having been considered by the Financial Ombudsman Service in recent times too. It has not always been easy to draw out clear principles with some quite fact-specific determinations, but this decision gives a helpful indication of what the ombudsman is looking for. Limitation will increasingly become an issue for new complaints, but decisions like these serve as a timely reminder of the risks of getting it wrong when dealing with a tricky transfer request.”

“The regulations that have been in place now for just over a year have caused much debate, particularly with supposedly straightforward transfers, but the flags are wide-ranging and do at least provide ample scope to prevent suspected scam transfers. There really should be much less scope now for transfers like Mrs G’s to happen in the current climate.”

According to the decision, if the trustees since appointed to the LQPS retrieve some or all of Mrs G’s pension fund and benefits, TP will be able to recover that amount from Mrs G. TP will also be entitled to recover the compensation that Mrs G receives from any successful application to the Financial Services Compensation Scheme (FSCS).