Pensions Ombudsman confirms no unreasonable delay where scheme unaware of deadline to transfer

The PO commented that, where deadlines are important, members should request transfers in a timely fashion and explain any time sensitivity at the outset.

The dispute involved Mr H, who complained that his scheme’s administrator delayed the transfer of his pension to his receiving scheme. Due to this delay, he was unable to take advantage of his unused personal tax allowance for the 2019-20 tax year.

Mr H was a member of a personal pension scheme, with a guaranteed annuity rate. As the value of his pension pot exceeded £30,000, he was required by legislation to take independent financial advice before transferring to another scheme.

On 30 January 2020, Mr H’s independent financial adviser requested a transfer quotation from the administrator. The transfer quotation was issued on 5 February. On 3 March, the independent financial adviser instructed the administrator to transfer Mr H’s fund to a receiving arrangement through the Origo pension transfer service.

On 5 March, the administrator wrote to the independent financial adviser with the forms required prior to the transfer proceeding. The letter stated that the adviser must complete a pension advice declaration form but this was not included in the pack. The forms were also sent to Mr H. The administrator sent a pension advice declaration form to the adviser and Mr H the following day.

On 11 March, Mr H contacted his financial adviser about the forms he had received. The adviser said that it had not received these letters and asked Mr H to forward the correspondence. On 12 March, the financial adviser asked the administrator to re-issue the letter. On 13 March, the adviser sent the administrator the completed pension advice declaration form and with this form, he returned the administrator’s covering letter dated 6 March.

On 18 March, the administrator requested additional information from the independent financial adviser because it had not been able to verify the adviser’s authorisation on the financial services register. It asked that the adviser’s firm’s senior manager, as defined by the FCA, call or write to confirm his authorisation to advise on pension transfers. This request was re-sent on 20 March, when the financial adviser chased the transfer and indicated that he had not received the earlier letter. The requested confirmation was received by the administrator on 23 March, although it was not recorded on Mr H’s file until the following day. At this point, the adviser noted that the transfer was tax year end sensitive and asked for the transfer to be prioritised.

On 27 March, the adviser asked for an update and was incorrectly told that the confirmation had not yet been received from his senior manager. On 28 March, the administrator confirmed that the transfer would proceed in the next four or five working days. The transfer payment was made on 30 March and received by the receiving scheme on 2 April.

Mr H crystallised his benefits on 3 April and his receiving scheme then wrote to him to explain that his pension income could not be processed quickly enough to be paid before the end of the tax year.

Mr H complained to the transferring scheme that it had delayed the transfer of his pension.  As a consequence, he could not withdraw £11,000 as pension income from his receiving scheme in the 2019-20 tax year to take advantage of his unused personal allowance. The administrator confirmed that it had followed its standard due diligence process and that the relevant communications had been sent to the independent financial adviser’s address. Mr H was unhappy with this because he said his adviser had told him that the pension advice declaration form had been sent to an incorrect address.

The transferring scheme contacted the receiving scheme to ask what happened to Mr H’s transfer payment when it was received. The receiving scheme said that the payment would have had to reach it on or before 19 March for Mr H’s pension income to have been processed before the tax year end.

The transferring scheme rejected Mr H’s complaint but offered him £100 for any confusion caused by sending the transfer forms to him as well as the independent financial adviser, Mr H accepted this amount but referred his complaint to the PO.

The PO concluded that the administrator had not unreasonably delayed the transfer. Mr H needed the funds to reach the receiving scheme by 19 March, but this deadline was never communicated to the transferring scheme: indeed, this deadline had passed before his independent financial adviser informed the administrator that the transfer was time sensitive. The administrator had conducted due diligence in an appropriate manner and had reasonably deferred due diligence checks on the adviser until the pension advice declaration form was completed, as the member could have changed adviser up to this point. It was unfortunate that the financial adviser was incorrectly told that the confirmation had not been received, but this did not delay the overall transfer process. 

The PO has also recently issued a number of expedited determinations in complaints about ‘lifestyling’ investment strategies in defined contribution pension plans. The complaints were made by members approaching retirement who were unhappy about unexpected falls in their fund values following automatic switches, for example from equities to gilts.

The PO did not uphold the complaints because the lifestyling strategies were clearly and regularly explained to members. These decisions demonstrate the importance of good member communications, particularly around lifestyling strategy risks and benefits, together with clear opt-out instructions.