Arriva Money Purchase Scheme · CAS-62927-V2H3

CAS-62927-V2H3

Ombudsman’s Determination Applicant Mr N

Scheme Arriva Money Purchase Scheme (the Scheme)

Respondent Aon Consulting Limited (Aon)

Outcome

Complaint summary Mr N complained that Aon was negligent when agreeing to transfer the benefits in the Scheme to the Capita Oak Pension Scheme (the Receiving Scheme).

Background information, including submissions from the parties

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Page 8 of the “fraud action pack” provided a number of warning signs / red flags that pension providers should be on the lookout for:

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On 22 February 2013, the Receiving Scheme’s administrator (the Administrator) sent Aon the completed transfer discharge forms and requested that the transfer be actioned. The Administrator confirmed that the scheme was a Defined Contribution Occupational Scheme registered with HMRC and provided its registration certificate.

In March 2017, Dalriada, an independent trustee, was appointed as independent trustees of the Receiving Scheme and notices were sent to all affected individuals regarding its appointment and the steps it was taking towards taking exclusive control of the existing trustee bank accounts. It is also stated on the notice that Dalriada were investigating all assets of the Receiving Scheme to understand where and how they are held. (See Appendix One)

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On 10 September 2020, Aon sent its written response to the complaint as follows:-

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Following the complaint being referred to The Pensions Ombudsman (TPO), it requested clarification from Aon regarding its transfer processes and due diligence at the time of Mr N’s request.

5 CAS-62927-V2H3 Aon provided its response and stated that it had not implemented the TPR guidance until around May 2013, so it did not adhere to TPR guidance at the time of Mr N’s transfer.

Adjudicator’s Opinion

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Money Redress further submits:

• In the transfer documents it could be seen that the Administrator was requesting that the transfer be completed swiftly, and that should have been seen as a warning sign. This can be seen in the following wording:

“…please ensure that you contact us promptly so we can resolve any issues without causing delay.”

“Your assistance in ensuring this transfer is completed promptly will be gratefully appreciated.”

• As the Receiving Scheme was an occupational scheme, Aon should have checked that Mr N was employed in some capacity. As it happens Mr N was employed, but the check was not made. Mr N was a bus driver and had Aon queried this, it would have identified a sham receiving scheme structure, as there was no employment connection between Mr N and the Receiving Scheme. Although Mr N would still have had a statutory right to transfer, he would have been better informed if this check was done correctly, as it would have highlighted pension liberation risks which he should then have been informed of by Aon.

• The Receiving Scheme was stated as being located in Manchester whilst Mr N lived in London. It was only registered on 23 July 2012, which was around seven months before Mr N’s transfer. It was also established in Cyprus, which was a clear overseas element and a potential contradiction to its Manchester address on covering letters.

• Although Aon was not aware of all the warning signs it could have been aware of multiple warnings by reviewing the transfer pack. Aon was aware that Mr N was under 55 and therefore that early release pension liberation was a possibility. It could also be seen that the Administrator was encouraging a speedy transfer, that the Receiving Scheme was newly registered and the fact that it was established in Cyprus. These were unusual features which required further checking. Further due diligence and direct contact with Mr N would have confirmed any concerns and revealed further warning signs such as the cold call, offer of inducement and

8 CAS-62927-V2H3 advice from a non-regulated firm. More was expected of ceding schemes than simply sending the Scorpion Leaflet.

• The consideration should not have been what Mr N would have done if he received the Scorpion Leaflet, but what he would have done if there had also been a dialogue with him about the warnings and a request for further information regarding the pension liberation concerns. There was no reasonable basis to conclude that had Mr N been provided this service, he would have continued with the transfer. It is likely that he would not have.

• It also stated that Mr N had confirmed the following points:

(i) he did not pursue taking a lump sum from the Receiving Scheme;

(ii) he was not in such a dire financial situation in 2013 to want or rely on an incentive of around £500 to take such a risk with his pension; and

(iii) he was enticed to transfer based on guaranteed returns of 8% per annum. Mr N believed that Aon could have persuaded him not to transfer had it provided him with risk warnings.

• Mr N should be put back in the position he would have been in had the transfer not occurred either by way of reconstruction of his Scheme benefits or a cash payment.

Ombudsman’s decision

I will not repeat the findings of the Adjudicator regarding the identified maladministration, with which I agree. Suffice to say that a period of one-month was more than sufficient for new procedures, adhering to TPR’s updated guidance, to be implemented by Aon. It is unfortunate that Aon did not provide Mr N with pension scams material, or the Scorpion Leaflet prior to the transfer completing. It should have done so and should have implemented the updated guidance at the time of Mr N’s transfer. As it did not do so within the one-month period of grace, I consider this to be maladministration. Accordingly, I agree with the Adjudicator that an appropriate award for the serious distress and inconvenience caused to Mr N in these circumstances is £1,000. However, I also agree with the Adjudicator that this failure did not result in Mr N making a transfer that he otherwise would not done.

9 CAS-62927-V2H3 Aon did carry out a basic level of due diligence at the time of the transfer (see paragraph 15), by confirming that the receiving scheme was an occupational pension scheme and was registered with HMRC. Limited checks were not, in my view, unusual at the time. However, Aon failed to send out the Scorpion Leaflet (which would have flagged some of the risk factors that Mr N could have then brought to the attention of Aon), or seemingly consider the risk warnings contained in the ‘fraud action pack’ for professionals. Nonetheless, it is not clear to me that any of those high level ‘red flags’ would have been apparent to Aon at the time in any event (such that it would have triggered a need to ask Mr N further questions). For example, it would not have been clear that Mr N was trying to access his pension before age 55 – and I don’t agree with Mr N’s representative that the mere fact that a member is making a transfer before age 55 is indicative of an attempt to access his pension early. Transfers before age 55 are not uncommon and do not by extension result in liberation attempts. Similarly, I do not agree that a statement in the transfer pack that: “your assistance in ensuring this transfer is completed promptly will be gratefully appreciated” would be sufficient to raise a concern that the member is putting pressure on the trustee to carry out the transfer quickly.

There is an argument that the receiving scheme was only newly registered, as it was registered some eight and a half months before the transfer was paid. However, this would be on the cusp and in the absence of the other warning signs, in my view, this would not have led Aon to make the extensive, additional enquiries that Money Redress suggests.

Regarding the geographical location, the “fraud action pack” does highlight that the transferring scheme may wish to query the geographical location of the sponsoring employer (although not the location of the receiving scheme) in relation to the member (see Appendix Four). However, even then, these questions would only have arisen if an initial warning sign had been identified, and Aon had then gone on to ask further questions regarding the nature of the scheme.

I also note that Mr N’s representatives argue that Aon should have made further enquiries about Mr N’s employment. However, as seen in Aon’s response of 10 September 2020, in the transfer documents signed by Mr N, a declaration was included which stated that he was transferring to an occupational pension scheme with his current employer and that he understood and accepted that once the transfer value had been paid, the Scheme’s Trustee did not owe him, his family or dependents any benefits. This statement and the fact that Mr N would have read and signed the same would, on the basis of the standards of the time, have been enough for Aon to accept that Mr N did have an employment connection.

Although Mr N has stated in the further submissions that he did not pursue taking a lump sum, one can see how the offer of a lump sum, a £400 incentive and the promise of 8% returns per annum would be compelling. These incentives could entice a member to transfer regardless of personal financial circumstances, of which I cannot comment on as Mr N has not provided any supporting evidence.

10 CAS-62927-V2H3 The fact that Mr N did proceed with the transfer shows that these incentives were attractive enough at the time to encourage Mr N to proceed. If the incentives were not attractive to him, he would likely not have initiated the transfer process in the first place. Mr N stated himself that he was enticed to transfer based on “an almost guarantee” of returns of 8% per annum. The fact that Mr N was enticed by the incentives offered leads me to agree with the Adjudicator that the outcome is likely to have been unchanged, even if the Scorpion Leaflet had been issued and the new guidance adhered to.

It is not Aon’s, or any transferring schemes’ responsibility to persuade or advise a member on their transfer or any other financial decisions. The member is responsible for their own personal financial decisions and to expect Aon to have attempted to persuade Mr N not to transfer is unreasonable. Similarly, in the absence of a legal requirement to do so, it is also not Aon’s responsibility to ensure that financial advice is received from a regulated advisor, again the member is responsible for their own financial decisions and acquiring appropriate advice.

I partially uphold Mr N’s complaint against Aon.

Dominic Harris

Pensions Ombudsman

Pensions Ombudsman

29 July 2024

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13 CAS-62927-V2H3 Appendix Two Pension Schemes Act 1993 93A Salary related schemes: right to statement of entitlement (1) The trustees or managers of a salary related occupational pension scheme must, on the application of any member, provide the member with a written statement (in this Chapter referred to as a “statement of entitlement”) of the amount of the cash equivalent at the guarantee date of any benefits which have accrued to or in respect of him under the applicable rules. (1A) In subsection (1), the reference to benefits which have accrued does not include benefits which are attributable (directly or indirectly) to a pension credit. (2) In this section— “the applicable rules” has the same meaning as in section 94; “the guarantee date” means the date by reference to which the value of the cash equivalent is calculated, and must be— (a) within the prescribed period beginning with the date of the application, and (b) within the prescribed period ending with the date on which the statement of entitlement is provided to the member. (3) Regulations may make provision in relation to applications for a statement of entitlement, including, in particular, provision as to the period which must elapse after the making of such an application before a member may make a further such application. (4) If, in the case of any scheme, a statement of entitlement has not been provided under this section, section 10 of the Pensions Act 1995 (power of the Regulatory Authority to impose civil penalties) applies to any trustee or manager who has failed to take all such steps as are reasonable to secure compliance with this section.

Appendix Three The Pension Schemes Act 1993, Section 95(1) 95 - Ways of taking right to cash equivalent 1. A member of an occupational pension scheme or a personal pension scheme who acquires a right to a cash equivalent under this Chapter may only take it by making an application in writing to the trustees or managers of the scheme requiring them to use the cash equivalent to which he has acquired a right in whichever of the ways specified in subsection (2) or, as the case may be, subsection (3) he chooses.

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16 CAS-62927-V2H3 Pensions Act 2004 18 Pension liberation: interpretation (2)Money is to be taken to have been liberated from a pension scheme if— (a)the money directly or indirectly represents an amount that, in respect of accrued rights [F1or an entitlement] of a member of a pension scheme, has been transferred out of the scheme in pursuance of— (i)a relevant statutory provision, or (ii)a provision of [F2the scheme rules], other than a relevant statutory provision, (b)the trustees or managers of the scheme transferred the amount out of the scheme on the basis that a third party (“the liberator”) would secure that the amount was used in an authorised way, (c)the amount has not been used in an authorised way, and (d)the liberator has not secured, and is not likely to secure, that the amount will be used in an authorised way.

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