A member of the British Steel Pension Scheme who claims he was ‘scammed’ out of his savings has been denied compensation by The Pensions Ombudsman after it found maladministration had not occurred.
The complainant, identified as Mr D, alleged that Open Trustees Limited failed to carry out sufficient due diligence when it transferred his pension fund to a small self-administered scheme with Bespoke Pension Services.
However, TPO ruled the trustee was not responsible for Mr D’s loss and did not uphold the complaint.
Chain of events
Mr D joined the British Steel pension scheme in 2004 and left on 21 January 2008, at which time he became a deferred member.
In 2014, Mr D received an unsolicited approach from an agent of First Review Pension Services offering him a free pension review which he accepted, not aware that First Review was not regulated by the Financial Conduct Authority.
He was persuaded to transfer his pension to a new scheme in order to invest in a fractional share of an overseas hotel resort which, he was told, would offer him “significantly” better returns than his scheme.
On September 1 2014, the trustee transferred £41,507 to the Ssas and confirmed to Mr D that all his benefits under the scheme had been transferred.
In July 17 2020, claims management firm Money Redress Limited complained on behalf of Mr D that the trustee should have assessed his transfer request carefully and identified warning signs.
These included the receiving scheme being newly registered with HMRC, Bespoke being a relatively new business, the sponsoring employer being a dormant company, and Mr D being initially contacted by a cold call.
Money Redress also claimed the trustee did not provide Mr D with a copy of the Scorpion Leaflet which is designed by regulators to raise awareness on the possibility of pension liberation and other pension scams.
On September 25 2020, the trustee responded to the complaint, stating that it was clear the former scheme administrator took steps to ensure that appropriate warnings had been issued to Mr D, such as including a copy of the Scorpion Leaflet.
“Mr D appeared to have made a poor financial decision despite having received the Scorpion warning and having expressly confirmed that he was aware of the risks,” the trustee said.
“In the circumstances, it was appropriate that he should take responsibility for his decision to proceed and the losses he claimed to have suffered.”
Positions
While the trustee stated it sympathises with Mr D if his pension has been lost or misappropriated, it didn’t believe this was down to maladministration on its part due to it setting out its position.
The trustee therefore argued that Mr D may have made “poor financial decisions” despite the numerous warnings provided to him and that it shouldn’t be held accountable for any loss incurred.
Conversely, Mr D said that he was not adequately informed about the risks.
He said a warning provided by a firm which is advocating going ahead with a particular course of action is not going to be read by a consumer as warning against proceeding with the recommended transfer.
“There was no due diligence process and no communication with Mr D either as part of a due diligence process or to communicate the presence of warning signs to him,” TPO was told.
Judgment
However, the ombudsman disagreed with Mr D’s position, stating that it could not find in law that a duty of care exists on the trustee to carry out the due diligence suggested by the complaint.
It clarified that such due diligence would allow Mr D to mount a claim in negligence against the trustee.
“Putting aside the limited circumstances in which the common law will impose a liability on a party for ‘pure emission’, it is also clear from cases such as Desmond and Barclay Bank that imposing a duty to ‘do’ something is fraught with practical and legal difficulties,” it said.
It concluded by stating that, while Mr D has the ombudsman’s sympathy, it does not uphold the complaint.
tom.dunstan@ft.com
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