Rhm Pension Scheme · CAS-48913-Q9L9

CAS-48913-Q9L9

Ombudsman’s Determination Applicant Mr N

Scheme RHM Pension Scheme (the RHM Scheme)

Respondent Trustees of the RHM Pension Scheme (the Trustee)

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 transfer, the member should get independent financial advice. The following websites may be helpful to the member when making their decision …”

“I accept that I have not received any advice on transferring my Pension fund to the Scheme …”

and:

“I understand that I cannot influence the investment decisions of the Trustee in any way. I understand that the anticipated investment is a loan to Incartus Investments Limited (“Incartus”) and that Incartus’s ability to service the debt will depend on the success of its underlying investments. I understand the risks associated with this investment.”

• the ‘Receiving Scheme Warranty’;

• the ‘Member Application to the Trustees’ signed by Mr N which included the statement:

“I confirm: […]

c) that I am transferring to an occupational pension scheme of which my current employer is a scheme employer.

2 CAS-48913-Q9L9 d) I have read the enclosed leaflet “Predators stalk your pension” and understand that there could be serious tax consequences for my pension benefits if I transfer to a scheme or arrangement that is later deemed to have committed Pension Liberation Fraud.”;

• A copy of HM Revenue and Customs’ (HMRC) certificate confirming the Incartus Scheme’s registration on 6 June 2014; and

• An up-to-date print out of HMRC’s online registration form.

• GoBMV was not regulated by the Financial Conduct Authority at the time of the transfer.

• There was no evidence of appropriate due diligence having been undertaken apart from Mr N signing the transfer documentation stating that he had read the Scorpion Leaflet. The Trustee did not engage directly with Mr N to flag the risks of pension liberation.

• The Trustee should have obtained basic information about the Incartus Scheme which would have revealed a number of red flags (see Appendix 1 for further details).

• The Trustee’s maladministration had resulted in the loss of Mr N’s pension pot.

• Mr N was seeking to be put back to the position he would have been in had the transfer not taken place.

• Confirmation of why Mr N would have acted differently had the due diligence it claimed should have been undertaken been done. Also, what Mr N would have done differently.

• The amount of Mr N’s loss and how it was calculated.

• Evidence that the loss was not irreversible and why it considered that the Trustee should have reasonably foreseen the loss.

3 CAS-48913-Q9L9 • An explanation of why Mr N did not complain sooner and what steps he planned to take to mitigate the loss.

• Mr N did not recall receiving any written advice concerning the transfer.

• Mr N was not aware of the risks of the Incartus Scheme being associated with pension liberation or the misappropriation of his funds. Nor did he know how his funds would be invested.

• Dalriada was not in a position to value Mr N’s investments in the Incartus Scheme. It was likely that the majority of his funds, if not all, were lost.

• In March 2017, Mr N had contacted AFM to query the status of his fund. He was informed that he was unlikely to get his money back. He had no reason to ask earlier.

• It understood that Mr N took financial advice, initially from Blue Ocean and then from FFS.

• Mr N had confirmed that he had read the Scorpion Leaflet.

• Mr N made multiple transfers to the Incartus Scheme around the same time as the transfer from the RHM Scheme. In particular, transfers from the Social Housing Pension Scheme and Prudential.

• Mr N had previously requested a transfer of his benefits in the RHM Scheme to the Social Housing Pension Scheme around August 2006 with the intention of consolidating his pension savings.

• In addition, Mr N had requested a transfer value quotation in 2012, while receiving advice from another financial adviser.

• In the light of this, on the balance of probabilities, Mr N would have proceeded with the transfer of his benefits in the RHM Scheme to the Incartus Scheme regardless of any further checks that Hugh James has alleged were required.

• In an announcement dated June 2018, Dalriada stated:

“As of 7 June 2018, Incartus has repaid £6.09m to the Schemes out of a total owed of approximately £21m. As commented above, Incartus had originally estimated full repayment of the loans by the summer of 2018, but it has now revised its proposals and extended the estimated final repayment date to the end of 2018 and possibly into 2019.”

4 CAS-48913-Q9L9 • Mr N had failed to demonstrate what loss, if any, he had suffered and what steps were being taken to mitigate the alleged loss.

• A subsequent announcement from Dalriada indicated that Incartus had failed to meet the repayment terms which had been put forward, and that Dalriada was taking steps to enforce repayment of the loans that had previously been made.

• The documentary evidence did not support the Scorpion Leaflet being sent to either FFS or Mr N. Mr N does not recall receiving the Scorpion Leaflet. He says that, had he received it, he would have made further enquiries.

• The Trustee’s duty of care was not overridden by a statutory obligation to make the transfer. It was under an obligation to carry out adequate due diligence.

• The events relating to this case occurred around nine years ago, outside the usual time limits for cases to be considered by TPO.

• Aon Hewitt had carried out adequate due diligence based on the guidance from TPR that was in place at the time of the transfer. A list of the checks the Trustee said were undertaken can be found in Appendix 2.

• It was not obliged to carry out the additional checks identified by Hugh James. In particular:-

o In relation to establishing an employment link between Mr N and the Incartus Scheme, it had no reason to doubt the information provided by Mr N in the ‘Member Application to the Trustees’. Furthermore, a genuine employment link was not required for Mr N to have a statutory right to transfer.

o The transfer value was less than £30,000, so it was not obliged to check that Mr N had received appropriate independent advice.

o It was not qualified to give any financial or investment advice, so could not investigate the suitability of the underlying investments.

• Mr N received warnings concerning unsolicited approaches but decided to proceed with the transfer anyway.

• The Scorpion Leaflet was enclosed with the Letter as part of its standard process at the time. It was not part of its process to upload it to the member’s record when the Letter was uploaded.

5 CAS-48913-Q9L9 Adjudicator’s Opinion

The Trustee suggested that the time that had elapsed since the transfer took place was outside TPO’s usual time limits for considering complaints. In cases such as Mr N’s, what needs to be considered is when applicants first reasonably ought to have become aware of any potential problems with the receiving scheme. Hugh James has said that this was when, in March 2017, Mr N was told during a telephone conversation that there would be little possibility of getting the funds back. This was within three years of him making his complaint to TPO. While Mr N had earlier received a communication from Dalriada, the Adjudicator’s view was that this would not have raised adequate concerns about whether the transfer should have gone ahead. So, the Adjudicator’s opinion was that Mr N’s complaint was within TPO’s jurisdiction.

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Mr N did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Hugh James provided further comments on behalf of Mr N in response to the Opinion. These are summarised below:-

• The 2015 Guide came into force on 16 March 2015 and Mr N’s transfer to the Incartus Scheme took place on 5 June 2015, nearly three months later. It considered that three months was an excessive period to allow the Trustee to facilitate the implementation of the 2015 Guide.

• There would have been consultation regarding the 2015 Guide prior to it being published, and it was part of the Trustee’s responsibilities to be aware of upcoming changes. A leading law firm had published an article regarding the 2015 Guide the day after it came into force.

• A maximum period of one month should be allowed to put in place new checks. A number of previous Determinations by the Pensions Ombudsman referred to a one-month period being considered reasonable when implementing the 2013 Guide. A similar, or lesser grace period was appropriate for the 2015 Guide as the groundwork for implementing checks was already in place.

• The Trustee failed to provide any evidence of the due diligence checks that it said were undertaken.

• The Letter recommended that Mr N seek independent financial advice before proceeding with the transfer. It also provided a list of websites that may have been helpful to Mr N when making his decision. This information should have been shared directly with Mr N.

• There was no direct evidence to support the contention that Mr N or FFS were sent the Scorpion Leaflet. The Letter had a list of four enclosures which included “Predators Stalk Your Pension”. However, when the Trustee provided it with a copy of the Letter and enclosures, this particular enclosure was not included. As a matter of good record keeping, had the Scorpion Leaflet been issued with the Letter, it would have been retained on record with the Letter.

• Mr N signed the paperwork that he was presented with and did not understand the potential implications of what he was signing. He had a very limited understanding of pensions and English was not his first language. He was reliant on the advice he was given. He would not have proceeded with the transfer had the risks been explained to him.

I have considered the additional points raised by Hugh James; however, they do not change the outcome. I agree in the most part with the Adjudicator’s Opinion.

8 CAS-48913-Q9L9 Ombudsman’s decision

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I do not uphold Mr N’s complaint.

Dominic Harris

Pensions Ombudsman 31 May 2024

10 CAS-48913-Q9L9 Appendix 1 Basic information that Hugh James considers that the Trustee should have obtained and the red flags it said that this information would have revealed

Hugh James said that the Trustee should have obtained the following basic information about the Incartus Scheme:

• the type and legal status of the scheme;

• the date the scheme was established;

• the location of the scheme and its administrators;

• details of the employment link between the scheme and Mr N;

• the marketing methods used during the transfer process;

• details of any cash payments offered to Mr N;

• the investments underlying the scheme;

• the provenance of the scheme; and

• details of who provided Mr N with advice to transfer his benefits and whether there were any fees for this advice.

It went on to say that such enquiries would have revealed the following red flags:

• the Incartus scheme was newly established;

• the Incartus scheme was not linked to Mr N’s employment;

• Mr N did not live in the same area as the sponsoring employer;

• Mr N was under age 55 at the time of the transfer and had no pressing need to transfer;

• the transfer came about after an unsolicited approach to Mr N;

• Mr N was not advised on either the underlying investments, or the transfer, by an authorised individual; and

• Mr N was an unsophisticated investor.

11 CAS-48913-Q9L9 Appendix 2 Due diligence checks

The Trustee advised that the following due diligence checks were undertaken at the time of the transfer of Mr N’s benefits to the Incartus Scheme:

• the Incartus Scheme was not newly registered with HMRC. Its registration had taken place on 6 June 2014, long before Mr N’s transfer application was received in March 2015;

• there was no suggestion of Mr N attempting to access his benefits before age 55. He had a protected pension age of 50 under the RHM Scheme and was already age 52 at the time of the transfer;

• Mr N had applied no pressure to have the transfer completed quickly;

• the documents it received gave no indication that Mr N had been approached unsolicited. Also, it was not the first time he had considered transferring his benefits;

• there was nothing to suggest that Mr N had been informed of a legal loophole;

• Aon Hewitt was not processing an unusually high number of requests relating to the Incartus Scheme at the time of Mr N’s transfer;

• there was nothing to suggest that it was an overseas transfer;

• Mr N confirmed he had read and understood the warnings in the Scorpion Leaflet;

• Mr N confirmed he was aware of the benefits he could expect in the Incartus Scheme;

• Mr N said he was transferring to an occupational pension scheme with his current employer;

• no communications were received from parties chasing the transfer; and

• Mr N raised no concerns or questions, despite its invitation to “get in touch” if there was anything he wanted to know. He could have paused the transfer process when asked for evidence of his identity.

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