Hsbc Bank Uk Pension Scheme · CAS-79469-G9X0

CAS-79469-G9X0

Ombudsman’s Determination Applicant Mr E

Scheme HSBC Bank (UK) Pension Scheme (the Scheme)

Respondents Willis Towers Watson (the Administrator)

Outcome

Complaint summary Mr E has complained that:-

• The Administrator caused delays in the transfer of his pension funds from the Scheme into the HSBC Flexible Retirement Account (FRA) (the Arrangement).

• His pension funds were disinvested early, and he should be compensated for the period his funds were not invested in the Arrangement.

Background information. Including submissions from the parties The sequence of events is not in dispute, so I have only set out the salient points.

As relevant, His Majesty’s Revenue and Customs (HMRC) Pensions Tax Manual PTM1000001 states:-

“Before making a transfer the scheme administrator should have carried out reasonable checks in relation to the transfer as part of their due diligence. If HMRC considers that the scheme administrator has not carried out sufficient due diligence checks into the transfer, they will not normally have met the conditions to be discharged from the scheme sanction charge.

There is no checklist of the acceptable due diligence requirements as each case will depend on the circumstances.

1 CAS-79469-G9X0 If a scheme administrator has any concerns about a proposed transfer, they can write to HMRC to ask about the status of the receiving scheme.”

Under guidance set out by the Pensions Regulator (TPR), administrators and trustees are required to perform and document sufficient levels of due diligence for any member who requests a transfer of benefits. The due diligence checks are carried out to protect members from transferring their benefits to a pension liberation scheme, otherwise known as a pension scam.

On 1 September 2020, Mr E was made redundant from his employment at HSBC.

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Mr E remained unhappy and raised a complaint under the Scheme’s Internal Dispute Resolution Procedure (IDRP).

On 14 May 2021, the Trustee provided its Stage one IDRP response to Mr E, which said:-

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Summary of Mr E’s position:-

• The transfer was poorly executed over a long period of time with drawn out and stressful communication.

• The Administrator’s decision to complete a HMRC check was unnecessary. Mr E said his financial advisor’s view was that the check was not needed given their own guidelines and precedent in not referring other transfers to HMRC.

• There were no red flags on his transfer, so the Administrator’s decision to request a HMRC check was a poor judgement call during an incompetent transfer

5 CAS-79469-G9X0 process.

• He questioned why the Arrangement was not on the Administrator’s green list and why action had not been taken to put it on the list.

• It operated a process, on behalf of the Trustee, that aimed to ensure that a member’s benefits were protected from scams, and it had carried out appropriate checks prior to the transfer of monies out of the Scheme.

• It followed a standard transfer out procedure to mitigate the risk of pension scams. This procedure incorporated the principles of The Pension Regulator’s guidance and PASA’s Code of Good Practice on combating pension scams.

• Apart from the early disinvestment of Mr E’s funds, it was satisfied that it had properly completed the transfer process. It had offered him compensation of £500 for the distress it had caused him by disinvesting his funds too early.

• It had operated a green list procedure on all UK transfer out requests since 2015.

• The green list is a list of receiving scheme administrators and providers where it had decided there was a low risk of a pension scam happening if benefits were transferred to them. It is not a list of schemes that are “approved” for transfers, and it is not a list of “safe” pension schemes. There is still a risk when transferring benefits to these administrators and schemes. Its administration teams had to ensure that all required due diligence checks were completed.

• At the time of Mr E’s transfer, the green list consisted of: i. Pension schemes administered by the Administrator.

ii. Pension schemes administered by other well-known third-party administrators (TPAs).

iii. Pension schemes or policies administered by or set up by well-known insurance companies or pension providers.

iv. Public Sector schemes (e.g. Local Authorities, Police, Teachers’, or NHS).

v. Pension schemes of previously nationalised organisations such as Royal Mail or The Railway Pension Scheme.

vi. Pension schemes administered by any other “household names” (which do not fall into the categories listed above).

• It did not add schemes or providers to the green list unless it had concluded that the scheme satisfied certain criteria and there was a low risk of the scheme or provider being involved with pension scams. This required extensive investigation 6 CAS-79469-G9X0 and it would not consider adding a scheme or provider to the green list without completing a full investigation beforehand.

• Historically, it had rarely added any schemes or providers to the green list as it took a risk averse approach to pension transfers.

• In addition, following previous legal advice (and reinforced by industry concerns around mis-selling), it was not considering adding any new Self Invested Personal Pension (SIPP) providers to the green list in March 2021.

Caseworker’s Opinion Mr E’s complaint was considered by one of our Caseworkers who concluded that no further action was required by the Administrator. The Caseworker’s findings are summarised below:-

• The Administrator operated a process on behalf of the Trustee that was aimed at protecting a member’s benefits and it therefore carried out due diligence checks prior to the transfer of funds out of the Scheme.

• The HMRC pensions tax manual stated a reasonable level of due diligence was to be undertaken by a scheme administrator before it could be discharged from any possible HMRC sanction charges. Additionally, if there were any queries about a receiving scheme, HMRC should be contacted for further information and about the scheme’s status.

• There was no prescribed list for what due diligence measures should be taken and, in addition, HMRC does not specify how long due diligence should take. So, although he understood Mr E’s frustration at the time it took the Administrator to complete its due diligence checks, he was satisfied that the Administrator had acted within HMRC’s guidance.

• The Arrangement was not on the Administrator’s green list. So, it acted in line with HMRC’s guidance and its own internal due diligence checking process to check the Arrangement’s registration status.

• The Administrator had given Mr E an opportunity to waive the HMRC check, which he decided not to take.

• Mr E’s transfer took place within the six months generally allowed for transfers and the Caseworker thought there were no unnecessary delays. He appreciated that Mr E would have liked the transfer to have been made sooner but, in his opinion, the Administrator had been acting in Mr E’s best interests by following HMRC guidance, industry rules and regulations.

• The Caseworker did not believe there were grounds to compensate Mr E for the time his benefits were not invested in the Arrangement because he was of the view there had not been an undue delay in transferring his benefits. 7 CAS-79469-G9X0 • The Administrator had acknowledged that it disinvested Mr E’s funds too early on 19 November 2020, but it had compensated him by paying an extra £2,542.42 into the Arrangement.

• The Caseworker thought that the Administrator had tried to answer and help Mr E when he requested information, but some information was commercially sensitive and confidential.

• The Caseworker recognised that Mr E has suffered some distress and inconvenience in dealing with this matter, however, he said that the Administrator’s offer of £500 was in line with a significant award that TPO might make for non-financial injustice. He did not think a higher award for serious non- financial injustice was justified.

• The Caseworker said that TPO can only remedy individual acts of maladministration and cannot make general comments about commercial or business practices.

Mr E did not accept the Caseworker’s opinion and his complaint was passed to me to consider. I agree with the Caseworker’s Opinion.

Ombudsman’s decision Mr E has complained that the Administrator caused delays in the transfer of his pension funds into the Arrangement.

Mr E requested the transfer on 12 November 2020, and it was not transferred until 11 March 2021. Mr E wants to be compensated for the period of time his funds were disinvested and not invested in the Arrangement. He also seeks additional compensation for the distress and inconvenience.

I find that the Administrator’s transfer process, including its request for an HMRC check on the Arrangement, did not amount to maladministration. This process followed appropriate due diligence checks to ensure Mr E’s benefits were protected and that it complied with HMRC due diligence requirements. The Administrator had limited experience of the Arrangement, so it was not on its green list. The fact the Arrangement was a part of HSBC does not change the need for appropriate checks.

The Administrator has apologised and paid an extra sum to the Arrangement to compensate Mr E for disinvesting his benefits early.

I find that there was no undue delay in the transfer of Mr E’s benefits to the Arrangement, so I do not consider there are grounds to award additional compensation for the time Mr E’s funds were not invested in the Arrangement.

I accept that Mr E has suffered some distress and inconvenience in dealing with this matter. However, I consider the Administrator’s offer to pay £500 for non-financial injustice to be sufficient. 8 CAS-79469-G9X0 I do not uphold Mr E’s complaint.

Anthony Arter CBE

Deputy Pensions Ombudsman

17 June 2023

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