Legal General Group Uk Senior Pension Scheme · CAS-43568-Q2N2

CAS-43568-Q2N2

Ombudsman’s Determination Applicant Mr S

Scheme Legal & General Group UK Senior Pension Scheme (the Scheme)

Respondents The Trustees of the Legal & General Group UK Pension and Assurance Fund (the Trustee)

Trafalgar House Pensions Administration (the Administrator)

Outcome

Complaint summary Mr S has complained that the Trustee and the Administrator made errors during the transfer process that resulted in the transfer of his Cash Equivalent Transfer Value (CETV) being delayed. This meant his funds were out of the market for two weeks.

Further, Mr S says that he received very poor service from the Administrator; its inadequate processes also delayed the transfer. Mr S has asserted that the Administrator has acknowledged that the design of its internal processes is such that making a transfer within its own stated service standards is impossible.

Mr S believes the Trustee and Administrator have both failed in their duty to treat customers fairly and ensure client money is properly managed and not withheld unreasonably. Having acknowledged their administrative failings in this case, the Trustee and the Administrator have demonstrated no inclination to review their systems to prevent similar issues arising in the future.

Background information, including submissions from the parties. The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge that there were other exchanges of information between all the parties.

Mr S was a deferred member of the Scheme, which is a final salary arrangement.

1 CAS-43568-Q2N2 On 8 February 2019, in response to his request, the Administrator wrote to Mr S and enclosed a Transfer Pack (the Transfer Pack). A CETV illustration of £281,938.12 was supplied with the Pack. The CETV was guaranteed until 29 April 2019.

The Transfer Pack included a “Pension Scams Questionnaire” to be completed by Mr S. This asked a series of questions designed to identify any potential ‘red flags’ that might indicate the receiving scheme was a scam.

Notes in the Transfer Pack (the notes), under the heading ‘Next Steps’, stated that if the CETV was more than £30,000, Mr S had to take advice “from an appropriately qualified and FCA approved adviser” before the Administrator could pay his transfer.

The notes also stated that, once the completed documents had been received, it would take between five and ten working days for the transfer to be paid and could possibly take longer.

On 27 February 2019, following a meeting the same day to discuss a possible transfer of his pension, Mr S’ independent financial adviser (the IFA) wrote to the Administrator and enclosed a signed Letter of Authority (LOA). The IFA requested a copy of the Pack that it had recently sent to Mr S. The IFA also asked the Administrator a number of questions about the Scheme. He emailed a copy of his letter to the Administrator the same day.

On 6 March 2019, the Administrator responded to the IFA, and enclosed a Retirement Quote Pack dated 28 February 2019.

On 22 March 2019, the IFA emailed the Administrator to follow up the information request he had submitted on 27 February 2019. He explained that he needed the information urgently, as the CETV was due to expire on 29 April 2019.

On 2 April 2019, the Administrator responded to the list of questions it had received from the IFA.

On 8 April 2019, the IFA telephoned the Administrator to request a Summary Funding Statement. He also requested answers to further questions he had raised regarding the possibility of Mr S taking early retirement before age 55 or retiring due to ill health.

On the same day, the Administrator responded to the IFA’s questions regarding Mr S taking early retirement on normal health grounds or ill health retirement. It also attached a copy of the Summary Funding Statement in its email.

On 15 April 2019, the IFA requested a Transfer Application Pack (the Application Pack).

On 16 April 2019, the IFA issued his “Suitability Letter” setting out the reasons why he was recommending that Mr S transfer his pension from the Scheme to a Self- Invested Personal Pension (SIPP).

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On 24 April 2019, the Administrator wrote to the IFA and explained that its transfer application requirements were incomplete for the following reasons:-

• Mr S had indicated in the pension scams questionnaire, included as part of the Transfer Pack, that he had been told he would be able to have a higher tax-free cash sum by transferring. It required further information regarding this and had returned the Member Application so that Mr S could update the questionnaire.

• It had not yet received the completed Receiving Arrangement Application from ATS.

On 25 April 2019, ATS confirmed to the Administrator that Mr S wanted to transfer his Scheme benefits to his SIPP. It enclosed the Receiving Arrangement Application and the completed discharge forms, together with additional information that the

3 CAS-43568-Q2N2 Administrator might require including a copy of the SIPP’s pension scheme tax reference.

On the same day, Mr S wrote to the Administrator and provided further detail about tax-free cash it had requested in the letter it had sent him on 24 April 2019.

On 29 April 2019, the Administrator wrote to Mr S and asked for further clarification regarding the higher tax-free cash.

On 30 April 2019, Mr S provided the additional information the Administrator had requested.

On the same day, the Administrator emailed Mr S to confirm that it had received all the relevant paperwork to complete the transfer. The Administrator also sent Mr S a letter confirming that all its requirements had been met. It said that it would be processing his application.

On 16 May 2019, the Administrator wrote to Mr S to confirm that it had completed the transfer of his benefits to the SIPP. It also confirmed that the final transfer value was £281,938.12, and that this would be paid to the SIPP within five to ten working days. However, on the same day the Administrator also wrote to ATS to confirm that it would make the transfer payment by direct transfer “in the next couple of working days”.

On 28 May 2019, Mr S complained to the Administrator about the service he had received during the transfer process.

On the same day, the Administrator wrote to Mr S in response to his complaint and said:-

• It acknowledged that it had not met its usual service standards because it had failed to keep Mr S up to date with the progress of his case, for which it apologised. It noted that it had previously explained its processes for validation of the receiving scheme, monthly cashflow procedures and disinvestments. While it endeavoured to settle transfers within five working days of receipt of completed documentation, it had to adhere to these processes.

• It had received all the necessary information to proceed with the transfer payment on 29 April 2019. This was then settled on 16 May 2019, 12 working days after it had received the outstanding information.

• It accepted that this was outside the five working days under the service level agreement with the Trustee. However, there was some flexibility within the agreement in circumstances where information was required from the member or a third party.

• Under pensions legislation, trustees of occupational pension schemes were required to pay the transfer value to the receiving arrangement within three months of receiving the full transfer documentation. Consequently, it did not 4 CAS-43568-Q2N2 consider that the 12 working days it took to complete the transfer amounted to an excessive delay.

• It did not, at any stage, seek to withhold payment of the transfer value.

Mr S did not accept this response and continued to pursue his complaint.

On 9 December 2019, the Trustee sent its formal response to his complaint under the Scheme’s Internal Dispute Resolution Procedure (IDRP). In summary, it said:-

• The CETV illustration was issued to Mr S on 29 January 2019, with a guarantee date of 29 April 2019.

• Mr S did not request the Application Form until 15 April 2019 and did not return it to the Administrator until 18 April 2019. Based on the information he had provided, the Administrator was required to carry out additional checks which were completed on 29 April 2019. The Administrator confirmed to Mr S on 30 April 2019, that it had received all of the necessary information to proceed with the transfer.

• Following the date of receipt of the final information a cashflow check was carried out. As this indicated a disinvestment was required, this had to be raised and checked and paid out with the transfer being paid on 16 May 2019, 12 working days later.

• The Trustee regretted that the transfer process did not run as efficiently as it would have expected and that Mr S was not kept fully informed at all times. However, for the reasons explained it did not uphold his complaint.

Adjudicator’s Opinion

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Mr S did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr S provided his further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the following additional points Mr S has raised:-

36.1. The Adjudicator said that he contributed to the delays in completing the transfer because he did not involve his IFA at an earlier stage in the process. This is incorrect; he could not do this as he did not have an IFA at the time.

36.2. He has worked in the regulated financial service sector throughout his career. His complaint was based on regulations which he knows exist to ensure customers are treated fairly. The service he received fell short of what is expected and the Administrator acknowledged this while also stating it was not prepared to change its process. He did not complain on a whim. He is genuinely concerned that more vulnerable consumers will have to accept the same unfair treatment.

36.3. He had previously consolidated other pensions into a SIPP. This is not a regulated activity that requires an IFA. He has carried out pension transfers before but these simply involved the switching of SIPP provider.

36.4. He was previously a CEO of a network of IFAs. At the time, IFAs specialising in pension transfers were plentiful but have subsequently become rare. This is why it took time for him to appoint an IFA and to start the process. However, despite this, he considers that he and his IFA provided all of the information in a timely fashion.

36.5. He considers the Administrator responsible for the delay for the following reasons:-

• It waited until the day the funds were due to be transferred to carry out due diligence on the IFA (which is publicly available information on the FCA register).

• It delayed checking whether the Scheme had sufficient liquid assets to make the transfer payment.

• It also delayed carrying out a review of the whole transfer and obtaining the necessary authorisation from a senior manager. 7 CAS-43568-Q2N2 36.6. These delays on the part of the Administrator were wholly avoidable. The Administrator has acknowledged its transfer process is flawed and the outcome will always be that transfers will be delayed as a result, and yet it refuses to change its process.

36.7. The fact that the Administrator was aware that he needed the transfer by the end of April 2019 but failed to check whether the Scheme had sufficient liquid assets until May 2019, amounts to a fundamental flaw in its process. As a result, there was a delay of over two weeks when his funds were not invested. The Adjudicator’s view that markets can go up or down meaning the delay could potentially benefit him is a poor argument. The fact is, the Administrator held on to his money for two weeks without good reason and he should be compensated for its inadequate processes.

36.8. A regulated entity has a duty to treat customers fairly. The Administrator has admitted that its internal processes mean it is impossible for it to comply with its own published service level agreement. The delay in completing the transfer is the outcome of the way its processes operate. Despite its admission, it says it will not make changes to deliver the service level that it has promised. Other members will also be treated unfairly as a result.

36.9. With regard to the investment of his funds, he was not asked to provide evidence of the specific funds he had selected. The SIPP which was to receive the transfer was set up with Hargreaves Lansdown many years previously and was already funded from other transfers. It had a clear mandate for the investment of any new funds. A period of more than three and a half years has elapsed since his transfer from the Scheme and so it is no longer possible for him to prove how a dozen different funds moved during the period of 16 days when the transfer was delayed. In his view, the issue is that the deliberate policy on the part of the Administrator, to delay the release of the funds, means he had no choice in the matter.

Ombudsman’s decision

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I do not uphold Mr S’ complaint.

Anthony Arter CBE Deputy Pensions Ombudsman 27 January 2023

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