The Pensions Ombudsman (TPO) has not upheld a complaint against Western Power Pension Trustee after it was accused of not interpreting pension transfer regulations correctly when it referred the complainant to MoneyHelper.

Mr W complained that his transfer request had been unnecessarily delayed as it required him to seek a MoneyHelper safeguarding appointment after an ‘amber’ scam warning flag was raised.

He had requested to be financially compensated for the fall in his transfer value, and for a payment for stress and inconvenience.

However, TPO ruled that the trustee firm had not acted unreasonably in determining that an amber flag was present in Mr W’s transfer request and in referring him to MoneyHelper.

Mr W’s transfer request raised an amber flag for overseas investment, as global funds would be used in the receiving scheme.

Under the transfer regulations introduced in November 2021, the use of any overseas investment in the receiving scheme is categorised as an amber flag and the transfer will be paused while the member is referred to MoneyHelper.

This aspect of the regulations has been particularly controversial, with many in the pensions industry calling for the overseas investment flag to be clarified or scrapped.

The most recent XPS Pensions Group data showed that 92 per cent of transfer requests raised at least one scam warning flag in September 2023.

Mr W argued that the trustee had not interpreted the regulation correctly, but TPO concluded that the trustee did not act unreasonably and therefore did not uphold Mr W’s complaint.

Commenting on the decision, Pinsent Masons pensions litigation partner, Ben Fairhead, said: “The Ombudsman appears to be focussing on the reasonableness of the trustee’s decision. Although the outcome also accords with the trustee applying the literal interpretation of the regulations.

“It’s less clear what will happen when a transfer is not referred to MoneyHelper despite presence of an overseas investment in the receiving scheme, but where the trustee was following the regulator’s more pragmatic approach set out in its guidance. It is likely it will take longer to see complaints coming through where members claim to have lost out as a result of transfers that should have been referred for guidance.

“The fact remains that the literal reading of the regulations leaves no room for doubt but this conflicts with the guidance given by the regulator. We continue to await news from DWP on prospective amendments to the regulations to address this disconnection. In the meantime, trustees will continue to have to navigate their way through transfer requests carefully.”

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