The Deputy Pensions Ombudsman has dismissed a complaint by a member of a self-invested personal pension concerning the administrator’s decision not to transfer his pension to a small self-administered scheme due to pension scam concerns.

Background

At the end of 2019, Mr I submitted a signed application form requesting the transfer of Hargreaves Lansdown (HL) Self-Invested Personal Pension (the SIPP) to the Hermitage Small Self-Administered Scheme (Hermitage SSAS), administered by Empowered Pensions Ltd (Empowered).

The Hermitage SSAS claimed it would enable residential property investments – direct investments in residential property within a SSAS risk punitive tax charges of up to 70 per cent.

A short time after receiving the application form and supporting documents, HL wrote to Mr I warning him about the risks of pension liberation and provided links to The Pension Regulator’s (TPR) and the Financial Conduct Authority’s (FCA) websites, as well as TPR’s Scorpion literature on pension scams.

Transfer application

HL contacted Mr I by telephone to make further enquiries about the Hermitage SSAS. In response, Mr I confirmed that he had become aware of Empowered and the Hermitage SSAS through a Facebook group and had not been offered any cash payments, bonus, commission or loan from the Hermitage SSAS.

Nor had he been pressurised by anyone to make a quick decision about the transfer, however, he had not sought any independent financial advice.

Mr I acknowledged that the Hermitage SSAS fees were higher than the SIPP but he considered the property investment advantages to be a fair trade off.

He also confirmed that he was not currently in receipt of any earnings from employment, but he and his employer would be making pension contributions into the Hermitage SSAS.

During June and July 2020, HL informed Mr I that it had written to HMRC for further information about the Hermitage SSAS. HL reiterated its concerns about the transfer, namely that he had not taken financial advice from a regulated financial adviser about the transfer; the principal employer had filed accounts as a dormant company.

HMRC could de-register a pension scheme, where the participating employer was dormant or had been for any month in the past 12 months.

Also that even an indirect investment in residential property could be subject to taxable property rules; and being introduced to a scheme through a form of cold contact (Facebook) was a potential warning sign of a pension scam.

Vanguard SIPP

On 6 May 2022 Mr I’s SIPP was instead transferred to another pension scheme called the Vanguard Self-Invested Personal Pension.

Complaint to the Pensions Ombudsman

In 2022 Mr I filed a complaint with TPO’s office, arguing, amongst other points, that even though HL claimed that the principal employer was dormant, the company had been actively trading. Mr I also said that he was well aware of the HMRC restrictions on a SSAS investing in residential property and that he had suffered distress and aggravation.

The deputy ombudsman held that HL conducted its due diligence in accordance with the relevant regulatory requirements. The deputy ombudsman was satisfied that HL’s decision to not allow the transfer was reasonable and not made arbitrarily, as Mr I suggested.

Comment

Unfortunately pension scams are here to stay. Scammers are getting even more sophisticated in their approach and tactics. Social media can be tantamount to ‘cold calling’.

Trustees, administrators and investors must be ever vigilant. Proper ‘due diligence’ in accordance with the Pension Scams Industry Group (PSIG) code, regulatory guidance and legislation is now a fundamental part of the transfer process.

The deputy ombudsman also noted that Mr I’s qualifications in chartered accountancy and corporate finance, and the fact that he has worked in financial markets for 20 years, does not equate to knowledge of pensions or pension transfers.

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