A recent decision from The Pensions Ombudsman (TPO) has highlighted the increased risks facing trustees and administrators in the context of pension transfers, Freshfields Bruckhaus Deringer has warned.

The firm stated that the recent TPO case of Mr T v James Hay Partnership has "further complicated" the pensions transfer market.

In particular, it cited TPO's decision as a demonstration that trustees and administrators could be required to pay compensation to members who have suffered investment losses due to a delay in processing a transfer request, even where the transfer was made before the statutory deadline.

In the case of Mr T, whilst the initial compensation awarded by TPO was limited to £2,000 for distress and inconvenience, a subsequent High Court appeal saw TPO publish a second determination.

This in turn saw TPO take the view that, on the balance of probabilities, Mr T would have invested the full fund amount of his cash funds in the FTSE 100 had he received the transfer into his self-invested personal pension (SIPP) prior to the Brexit referendum.

As such, Mr T was awarded an additional payment of £44,700, together with interest at 8 per cent per annum from August 2016 through to the date of payment.

Freshfields noted however, that in light of the administrative difficulties caused by Covid-19, alongside a rise in the number of transfer requests and the need to be vigilant due to the frequency of pension scams, many schemes are likely taking longer to process transfer requests or switch investments.

It also pointed out that further market fluctuations are expected in light of the upcoming US election and the end of the Brexit transition period.

Considering this, the firm has urged trustees and administrators to take appropriate action to ensure they have robust processes in place to manage any delays to pension transfers.

They also encouraged pension schemes to communicate with members to understand whether there are any specific time-frames relating to their request, warning that those who do not take mitigating action could be at risk of paying compensation for any resulting investment losses.

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