A recent Pension Ombudsman case has been highlighted in the pension press, including this Pensions Expert article. It is certainly a timely reminder to trustees and their administrators that, particularly in volatile markets, delays in implementing transfer requests can cause significant and foreseeable loss to members. In this case over £43,000 plus interest was awarded to reflect loss of the member’s opportunity where the member’s instruction to transfer before the EU referendum was not met. Although a personal pension case, it is also of interest to both DB and DC occupational pension schemes.
However, as Burges Salmon pensions disputes expert Justin Briggs comments, "this doesn’t set a precedent at all and is actually nothing more than the application of conventional principles ... years of steady markets have perhaps caused Trustees to forget that this type of claim exists, that they can be costly to resolve and will be more prevalent in years to come".
Whilst the quantification of loss may be harder for the Ombudsman or a court where it is not certain how the member would have invested, this cases shows that does not necessarily prevent an award being made. As ever, each case must be considered on its facts.
What steps should trustees and providers take?
It remains the case that appropriate procedures and due diligence are critical in order to ensure that the transfer meets tax and preservation law requirements and to flag risks of scam activity, in line with industry guidance.
However, this needs to be balanced against the risk of implementation delays. It is therefore important that an efficient process is in place under which issues are raised as early as possible, and that this is monitored. Points referred for decision need to be sent to the right decision-maker(s) with appropriate context, including any relevant timing issues. Consider asking the applicant whether there are any particular timing constraints or rationale for the transfer, and being open if there are doubts about meeting them.
A recent Pensions Ombudsman determination has opened the floodgates for financial loss claims resulting from the mere possibility of missing out on stock market profit, due to trustees being tardy in processing transfers.