The Deputy Pensions Ombudsman (PO) has published its decision in the complaint of a member who wished to transfer out of his pension scheme.
In this case, the annual benefit statements and transfer authority forms provided by Aegon, the pensions provider, implied there was no penalty for transferring out of the scheme. However, when the member consented to the bulk transfer proposed by his employer, a transfer penalty was deducted by Aegon from Mr Bower’s transfer value.
When Mr Bower discovered this, he complained to Aegon, who admitted that its systems had failed to take this transfer penalty into account, but informed him that the rules of the plan required the penalty to be applied. In recognition of its error, Aegon offered Mr Bower the option of being reinstated in the original plan as if he had not transferred, as well as apologising and offering him £350 in compensation for any disappointment and inconvenience. Mr Bower complained that Aegon should have honoured the transfer value as originally quoted, without application of any penalty.
The PO found that Aegon’s failure to inform the member of the transfer penalty before the transfer amounted to maladministration. However, as Aegon had no discretion under the plan’s rules and had made an adequate offer of compensation, Mr Bower’s complaint was not upheld. It was also relevant that the transfer value previously provided to Mr Bower had been marked as "estimated", which meant that it was too uncertain to have contractual effect.
This is a reminder for schemes to ensure that all member communications accurately reflect the position under the rules of the scheme, and particularly that any potential or definite additional charges are highlighted. Communications around transfers are particularly key in light of the recent increase in transfer levels experienced by many schemes as a result of members seeking to make use of the new pensions flexibilities.