The results of a High Court ruling could have interesting consequences for the pension industry and the issue of pension fraud in the future.
Bespoke Pension Services
The case of Hughes v Royal London reached the High Court after previously being dismissed by the Pensions Ombudsman. The complainant, Donna-Marie Hughes, brought the complaint against her pension provider Royal London, after the company had refused to sanction her request to transfer over £8000 from her existing scheme to the Bespoke Pension Services company.
Royal London were concerned with Bespoke Pension Services, the unregulated company that had approached Hughes. In refusing to sanction the transfer request, they argued that they were acting in Hughes’ best interests. After a detailed investigation on whether Hughes had the right to transfer, the High Court ruled in her favour.
A rise in pension fraud?
The outcome of similar cases in future may depend on the specific pension types involved, as opposed to being directly influenced by the result of Hughes v Royal London. The ruling in Hughes’ case was down to the individual having a statutory right to remove their money from their pension, but others may not have this same right, meaning a different result is possible.
On the surface however, the decision from the High Court to allow an individual to move their money to a scheme of their choosing – against the advice of their provider could have a big influence on the number of pension fraud cases in 2016.
Since the pension reforms of April 2015, pension savers have been able to obtain their money more easily than ever before, and whilst this has proved a positive for many, the change in legislation has coincided with a rise in pension fraud.
In some cases, this has meant some savers losing all their pension having transferred it into a dubious investment. In others, people have invested their savings in opportunities that did not bring financial reward. Another development was the rise in more standard pension schemes being transferred via SIPPs (self-invested personal pensions) into unregulated investments, when the investment was not suitable for the individual.
Regulatory guidance from the Financial Conduct Authority (FCA) and Pensions Regulator guards against pension fraud, and there is a genuine concern that any further relaxing of legislation will leave individuals more vulnerable.
Hughes v Royal London has not brought about any changes in the law, and only time will tell whether it will become a landmark case within the pensions industry. Given the potential complexity of the pension services industry and the often-large sums of money involved, we would advise anyone approached by a firm offering a better deal, via a cold call or spam text / email, on their pension to tread very cautiously. However good a deal may sound, it is worth noting that if something seems too good to be true, it usually is.
For more tips on avoiding pension fraud, please see our steps to follow here.
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