Principal Civil Service Pension Scheme · CAS-44594-N4P2

CAS-44594-N4P2

Ombudsman’s Determination Applicant Mrs D

Scheme Principal Civil Service Pension Scheme (the PCSPS)

Respondent MyCSP

Outcome

Complaint summary

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

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“Before deciding to go ahead with any transfer, you should understand what you are giving up and what you will get in return. If you need help with this, we recommend that you see an Independent Financial Adviser.”

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• a letter dated 9 December 2014 (the Basis of Transfer Letter), providing confirmation of the basis on which she was requesting the transfer of her benefits in the PCSPS to the SSAS. An extract from this letter can be found in the Appendix;

• ‘Part B – Application to transfer pension benefits to a money purchase occupational scheme (including a stakeholder arrangement)’ of MyCSP’s transfer discharge form. As well as confirming that she wished to proceed with the transfer of her benefits from the PCSPS to the SSAS, she ticked the declaration: “I hereby declare that I am an employee of Bungalow 1959 Limited which is a contributor to the money purchase scheme detailed on page one.” The form stated that:

“The PCSPS accepts no liability to make enquiries or perform any function other than those necessary to fulfil its statutory obligations in relation to the application of my cash equivalent transfer value in accordance with this and any other requests made by me.”

and

• a copy of the Scorpion Leaflet with a declaration dated 5 December 2014 which stated: “I can confirm I have read this document. I am not party to any such pensions liberation activity in anyway whatsoever.”

• HMRC’s notification of registration confirming that the SSAS was administered by Bespoke and was registered on 5 December 2014. The notification confirmed that the SSAS’ pension scheme tax reference was 00818753RK;

• the completed transfer discharge paperwork;

• the Basis of Transfer Letter;

• a copy of the SSAS’ trust deed and rules; and

• the Scorpion Leaflet signed by Mrs D confirming that she had read it.

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• In February 2018, Mrs D became aware that she would not be able to access her pension funds in the SSAS due to the illiquidity of the underlying investments. Prior to that, she had received regular statements from Bespoke which had not caused her any concern. The investment in the Resort Group was unlikely to be redeemable as there was no secondary market for this investment. It was unregulated and high risk.

• Mrs D was not experienced in investments. She had received no investment advice in the past and was a cautious person. She did not know that she held guaranteed benefits in the PCSPS or that those benefits would increase and bore no investment risk to her.

• In February 2013, The Pensions Regulator (TPR) had published ‘Pension liberation fraud - The predators stalking pension transfers’ (the 2013 Guide). MyCSP should have been familiar with this guidance. However, there was no evidence that MyCSP carried out any due diligence. The SSAS was newly registered and MyCSP had failed to act on this.

• It had been in contact with Bede, which was authorised by the FCA. Bede said that Mrs D had never been its client and it had never heard of Life Compare. Life Compare was registered with Companies House and its first annual return was on 26 October 2013, showing it as being dormant. It had been dormant thereafter. MyCSP had failed to verify that it was providing information to a trading or a regulated company. The FCA register would have verified that Life Compare was not authorised or connected to Bede.

• MyCSP accepted the transfer discharge form with a ticked box declaring that Mrs D was employed by Bungalow 1959 Ltd which was a contributor to the SSAS. Bungalow 1959 Ltd was filed as a dormant company. Mrs D was never employed by it, and she had been a non-earner since her redundancy. Furthermore, Mrs D was not aware that she was a director of Bungalow 1959 Ltd.

• There were serious concerns in relation to the Seminar that Mrs D attended in May 2014. It questioned the quality of HMRC’s due diligence on the key speakers and topics and said that HMRC was responsible for the outsourcer’s conduct. Mrs D said the fact that it had been arranged through her workplace gave her reassurance that she would not be exposed to detriment or harm. However, those 4 CAS-44594-N4P2 involved in the Seminar had a purpose to target individuals in order to acquire pension funds to be invested in the Resort Group.

• Had MyCSP carried out the correct level of due diligence and engaged with Mrs D, then Mrs D would not have transferred her benefits to the SSAS. She did not have a strong motivation to do so and would have been deterred by appropriate warnings. MyCSP contacted her only once during the transfer process to confirm the transfer had completed.

• It was not able to provide financial advice to members. It always advised that they should take independent financial advice.

• It had provided the necessary information to Mrs D in line with TPR guidance and its due diligence process. In particular, it had provided a copy of the Scorpion Leaflet which Mrs D had signed to indicate that she had read.

• It had reviewed a copy of the SSAS’ HMRC registration and Mrs D had confirmed that she was employed by Bungalow 1959 Limited.

• Mrs D had signed the Basis of Transfer Letter confirming she understood the information provided to her and that she was aware of pension liberation.

• As Mrs D’s request met the statutory requirements at the time, it was obliged to comply with her instruction and arrange the transfer. It was not for it to carry out research into the SSAS.

• The Seminar was run by a third party and not by MyCSP. It had no connection with Calder Conferences and was not involved in any way with the Seminar.

• Following TPR releasing the 2013 Guide, it had made a number of changes to its processes. These included issuing the Scorpion Leaflet and checking a ‘Transfer Watch List’ listing pension schemes and administrators brought to its attention as potentially being involved in fraudulent activities.

• PCCL had said there was no link between Bede and Life Compare. The onus was on Mrs D to ensure that the organisation she was receiving financial advice from

5 CAS-44594-N4P2 was regulated and not connected to the receiving scheme. This was highlighted in the Scorpion Leaflet. Even if MyCSP had identified that there was no link between Bede and Life Compare, it would still have been required to provide the transfer quote.

• Bespoke was listed with Companies House as incorporated on 22 March 2012 and was currently active.

• No act of maladministration had taken place. The correct process had been followed and appropriate checks undertaken.

• The fact that Mrs D had no concerns about the transfer until three years after it was finalised suggested there was no reason for MyCSP to question the transfer at the time.

• MyCSP should have checked whether Bespoke was connected to an unregulated investment company. Bespoke facilitated the investment of Mrs D’s transfer value in an unregulated investment.

• The Scorpion Leaflet should have been provided direct to Mrs D instead of being provided through Bespoke’s document handler for her to sign on her doorstep.

• Mrs D had a statutory right to transfer her benefits to another scheme and the transfer process was followed correctly, including signed discharge forms and checking that the SSAS had been registered with HMRC.

• The Scorpion Leaflet was included with the discharge forms sent to Bespoke and Mrs D had signed it to confirm she had read it.

• There were no indications why the transfer should not go ahead. No areas of concern were identified so there was no need for further enquiries.

• Its ‘Transfer Watch List’ at the time did not include Bespoke or Bungalow 1959 Ltd. It had also had no contact with Mrs D until 20 November 2018, suggesting she had no issues with MyCSP completing the transfer.

• Mrs D requested the completion of the transfer having received no regulated professional advice. It was not MyCSP’s responsibility to give her advice.

• Mrs D contended that her former employer introduced her to Life Compare. HMRC had no information dating back to 2014 in relation to the Seminar. However, Calder Conferences was only the administrative service used to book

6 CAS-44594-N4P2 accommodation for events. There was no evidence to support the claim that HMRC introduced Mrs D to Life Compare.

• In relation to the regulatory status of any advice she received, she believed the Seminar offered a safe environment in which to discuss her pension. For this reason, she did not carry out any background checks on the parties involved in the transfer.

• She was not in financial difficulty at the time of the transfer as she had been working up to 31 July 2014 and received a redundancy package. She had some savings in an ISA. She had no other pension provision as she had transferred her pension with the NHS to her pension with the Foreign & Commonwealth Office and then to the PCSPS.

• She was not offered any incentives to transfer her benefits out of the PCSPS.

• The first time she became aware of the Scorpion Leaflet was after she realised there was a problem with the SSAS. She then got a copy of it from the Citizens Advice Bureau.

• She never appointed Bede or Life Compare to act on her behalf and had never heard of them until after the transfer had completed. She acknowledged it was a long time ago and she could not confirm or deny signing the LOA.

• The complaint it was pursuing on behalf of Mrs D was against MyCSP. It had included details of Mrs D’s dissatisfaction with HMRC in order to provide some background on her complaint.

• Mrs D had signed a declaration that she had read and understood the Scorpion Leaflet. However, the associated risks had never been clearly explained to her.

• The Basis of Transfer Letter was a templated letter created by Life Compare that Mrs D had been asked to sign.

• MyCSP had issued transfer documentation to a company that was imitating a regulated firm.

• MyCSP should have undertaken further checks as part of its due diligence, including investigations into the relationship between Life Compare and Bede, whether any FCA regulated entity was involved in the transfer, Mrs D’s employment status at the time of the transfer and the suitability of the SSAS’ underlying investments.

7 CAS-44594-N4P2 • Mrs D had contacted Bespoke, First Review and the Resort Group to try to get funds out of the SSAS. She had made every effort to try to find out how to sell the underlying property that makes up the majority of her remaining funds, but she discovered she was unable to sell it.

Adjudicator’s Opinion

• The SSAS was registered with HMRC.

• Neither Bespoke nor Bungalow 1959 Ltd appeared on its ‘Transfer Watch List’ at the time of the transfer.

Furthermore, Mrs D had signed the Basis of Transfer Letter in which she confirmed that she was not seeking to access her pension before age 55 and that she had not been offered any cash or other incentives to transfer. In this letter she also confirmed that she had understood the risks associated with taking a transfer out of her existing pension arrangement.

In fact, the SSAS had been registered with HMRC on 5 December 2014 and the transfer completed on 14 January 2015. The check list in the 2014 Guide refers to the recent establishment of the receiving scheme being a possible warning sign. While this did not necessarily indicate a pension scam, in the Adjudicator’s view, it would have been good practice for MyCSP to have discussed this with Mrs D. However, the Adjudicator noted that the Guides were not legally binding documents. It was for each transferring organisation to set up its own due diligence process that it considered to be adequate in the circumstances.

In addition, the Adjudicator’s view was that it was reasonable for MyCSP to assume that Mrs D had some understanding of the risks involved due to the Basis of Transfer 8 CAS-44594-N4P2 Letter she had signed. This may not have provided MyCSP with an understanding of her exact level of knowledge. So, the Adjudicator considered this further in relation to the Scorpion Leaflet which, if read by Mrs D, would have provided more detailed information on the warning signs in relation to scams.

On 30 September 2014, MyCSP sent Life Compare an illustration of the transfer value in respect of Mrs D’s benefits in the PCSPS. It also enclosed a copy of the Scorpion Leaflet. In the Adjudicator’s view, best practice would have been to send the Scorpion Leaflet direct to Mrs D so that MyCSP could be sure that she had received it. However, a copy of the Scorpion Leaflet was returned to MyCSP on 15 December 2014 by Bespoke. Mrs D had signed the copy confirming that she had read it.

In the circumstances, the Adjudicator’s view was that it was reasonable for MyCSP to have assumed that Mrs D understood the information in the Scorpion Leaflet as she had confirmed that she had read it and she had not made contact to raise any questions. So, MyCSP could be confident that Mrs D was aware of the warnings present in relation to scams.

Mrs D had also signed MyCSP’s discharge form, stating that she was employed by Bungalow 1959 Limited. The Adjudicator’s view was that it was reasonable for MyCSP to assume that this was correct, even though it had subsequently been proven to be false - the employer’s name appeared to have been put together from Mrs D’s home address which started with ‘The Bungalow’ and her year of birth.

• The relationship between Life Compare and Bede and whether any FCA regulated entity was involved in the transfer.

• Mrs D’s employment status at the time of the transfer.

• The suitability of the SSAS’ underlying investments.

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Mrs D did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mrs D provided her further comments in response to the Opinion which are summarised below:-

• She did not sign or receive a copy of the Scorpion Leaflet during the transfer process. Furthermore, some of the dates on the paperwork relating to the transfer were in a different colour to her signature. She does not believe that all the signatures were hers, particularly that on the LOA.

• The SSAS had been registered with HMRC less than two months prior to the transfer taking place. This should have been picked up by MyCSP as a warning sign.

• MyCSP should have checked that the transfer payment was being paid into a safe arrangement. Furthermore, it should have been checked for money laundering.

• Life Compare was regularly chasing for the completion of the transfer and this should also have been picked up as a warning sign.

• She was not employed at the time of the transfer and MyCSP should have known this as it had her national insurance number. She was never contacted by MyCSP to discuss her employment status.

I have considered the additional points raised by Mrs D; however, they do not change the outcome. I agree with the Adjudicator’s Opinion.

11 CAS-44594-N4P2 Ombudsman’s decision

• the Basis of Transfer Letter;

• MyCSP’s transfer discharge form; and

• a declaration in relation to the Scorpion Leaflet.

• she was an employee of Bungalow 1959 Limited which was a contributor to the SSAS;

12 CAS-44594-N4P2 • she had read the Scorpion Leaflet; and

• she had received detailed information about the risks associated with taking a transfer out of the PCSPS.

Furthermore, during the transfer process Mrs D demonstrated a willingness to proceed with the transfer without considering the warnings that were available to her. In particular, she chose to confirm that she had read the warnings in the Scorpion Leaflet when this was not the case. Mrs D could have asked for a copy of the Scorpion Leaflet, if one was not provided to her at the time and read it when she had time. The documents were signed on 5 December 2014 and the transfer value was paid on 14 January 2015. So, she had nearly six weeks in which she could have asked questions and either delayed or stopped the transfer if she had doubts. On the balance of probabilities, I find that the transfer would have proceeded even if MyCSP had spoken to Mrs D.

13 CAS-44594-N4P2 I do not uphold Mrs D’s complaint.

Dominic Harris

Pensions Ombudsman 9 April 2024

14 CAS-44594-N4P2 Appendix Extract from the Basis of Transfer Letter

“The purpose of this letter is to provide you with additional confirmation of the basis upon which I have made this request and to seek to provide a record of the fact that I am aware of the issues relating to pensions liberation. Indeed, I have carefully considered my decision to request a transfer to the Scheme and have not made it lightly. […]

From guidance and information I have received in connection with this decision I appreciate that there has recently been a significant rise in cases of “pensions liberation” fraud. As a result there is increased concern and scrutiny around transfer requests being made, to ensure members fully understand the implications of making a transfer.

I therefore wish to confirm that the transfer request is being made in order that I can take advantage of investment opportunities available under the Scheme, none of which are in any way connected with pensions liberation. I have received detailed information about the Scheme, how it operates, who administers it and the risks associated with taking a transfer out of my existing pension arrangement.

In making this transfer I am not seeking to access my pension before age 55. […] I also confirm that I have not been offered any cash or other incentive by any person as part of my decision to transfer my pension to the Scheme.”

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