The High Court has overturned a decision of the Pensions Ombudsman which supported Royal London’s decision not to transfer a member’s benefits to another pension arrangement due to pensions liberation fears. This could have serious repercussions for pension scheme trustees, and for the Pensions Regulator’s crusade against unlawful liberation activity.

The Ombudsman’s determination

In 2014, the trustees of one of Royal London’s pension schemes refused to allow one of its members to transfer their benefits to a self-administered pension scheme. The member had initially been contacted by a company which Royal London and the trustees believed to be cold-calling all its potential customers. The trustees concluded that this scheme could not have been correctly categorised as an occupational pension scheme, and that as a consequence the member did not have a statutory right to transfer her benefits to it.

Their view was drive by the fact that the member was not an “earner” in relation to the scheme to which she wished to transfer her funds. There were also concerns over the legitimacy of the potential new scheme as it bore many of the hallmarks of a pensions liberation scam. The initial determination by the Pensions Ombudsman was in favour of Royal London and the trustees of its pension scheme.

High Court decision

The High Court has now overturned the decision given by the Pensions Ombudsman. The judgment provides instruction to trustees and administrators that members do not need to be in receipt of earnings from an employer sponsoring the occupational pension scheme to which they wish to transfer their pension. Earnings from another source are a sufficient basis upon which to become a member of such a scheme. The member should have, therefore, been given the right to transfer to the intended receiving scheme.


The Pensions Ombudsman has voiced his concerns over the recent ruling. “It seems likely that most transferring members will meet this requirement so, beyond verification of earnings and the provision of risk warnings, trustees and administrators will be conscious that under current legislation they cannot refuse such a transfer – even if they have significant concerns that it may be for the purposes of pension liberation.”

Royal London’s lawyers have echoed this view by explaining that the consequences of this ruling “are far-reaching and could leave pension scheme members more exposed to the risk of scams”. They have further opined that the judgment will now give much greater scope for individuals to move their money from legitimate schemes into potentially suspicious schemes and scams, as the hands of those being asked to make transfers (trustees and administrators) are increasingly tied by the inflexibility of the law.

There are some who have taken a more positive view, explaining that there are many legitimate self-administered schemes within the pensions industry, which schemes will be relieved as the unpicking of such transfers and the previous inflexibility of the law created huge problems for them.

Equally this ruling could ultimately give rise to further hounding and hard-selling from dubious schemes, and many more people could fall victim to pension liberation scams. In addition, trustees of occupational pension schemes will struggle to fully protect members from transferring their benefits to potential scams and fraudsters, and could in many instances have their hands tied by the law despite wanting to act in the best interests of the member or members concerned.

By Grace Ho