Pensions Ombudsman confirms requirements for valid CETV application

This is a useful determination because it confirms that, where a member has been provided with a Statement of Entitlement following a request for a Cash Equivalent Transfer Value (CETV), the trustees/administrators of the transferring scheme are entitled to insist that all the required information etc. must be received within the guarantee period for that guarantee to be honoured. It is not sufficient for the member or their IFA to argue that, provided some of the information is provided within that period, the guarantee must then stand.

‘Mrs E’

Mrs E requested a guaranteed statement of her CETV in August 2018. This was provided by the scheme on 24 August 2018, with the CETV of £423,154.16 being guaranteed until 24 November 2018. The notes accompanying the statement stated that:

“We must be in receipt of all completed forms by 24 November 2018 to secure the guaranteed transfer value. If we receive the ‘transfer agreement’ or ‘Confirmation of Appropriate Independent Advice’ form after 24 November 2018, the transfer value will be recalculated and it may be higher or lower than the value shown on the enclosed statement. If your revised guaranteed transfer value is higher, or within 10% of the amount shown on the statement of entitlement, we will go ahead and pay the revised transfer value.”

On 23 November 2018, one day before the guarantee period expired, the member’s IFA emailed the transferring scheme to provide the completed member’s portion of the ‘transfer agreement’. It was not, however, until 26 November 2018 that the IFA provided the scheme with the required confirmation of appropriate independent advice having been taken and only on 28 November 2018 did the receiving scheme provide their completed portion of the ‘transfer agreement’.

As all the information was not received by 24 November, the transfer value paid was £409,877.29 and not the CETV of £423,154.16 stated in the statement of entitlement.

The member complained to the Ombudsman.

Determination

The complaint was considered and rejected by an Adjudicator who said, inter alia:  

1. The Trustees of a transferring scheme would not have known if the member’s application satisfied the ‘ways’ referred to in subsection 95(1) of the Pension Schemes Act 1993 (the permitted ways of taking a right to a cash equivalent) unless it had the receiving scheme’s details and was able to check that it met either subsection (a), (b), (c) or (d) of subsection 95(2) of that Act. The Adjudicator was of the opinion that a member’s application could not have been treated as complete unless all of this information was provided within the guarantee period as set out in subsection 95(1A) of the Act. [In this case, the member’s portion of the ‘transfer agreement’ stated that the receiving scheme was a Personal pension Plan (although it appears that it did not name the actual receiving scheme).]
2. The Pension Regulator’s (TPR) guidance on DB to DC transfers states that “Members must also be informed that the authorised independent adviser’s confirmation that appropriate independent advice has been obtained by the member must be in the required form and be provided to the trustees within three months of the day on which the statement of entitlement was provided to the member”.
3. Whilst TPR’s guidance includes the statement that “Trustees have discretion to honour a transfer in the event member confirmation (in respect of the appropriate independent advice requirement) is received after the three-month period, for example, if there has been a delay in obtaining appropriate independent advice”, TPR was not suggesting the ten-day extension should be allowed in every case. In the Adjudicator’s view, it was for the Trustees of the transferring scheme to decide if they should exercise their discretion to allow further time. The did not, however, have to do so and this discretion did not extend to the receipt of any other information.
4. In its letter of 24 August 2018, the transferring scheme was clear in relation to its requirements for the CETV that had been quoted to be paid. It stated that it must receive all completed forms by 24 November 2018 to secure the guaranteed transfer value. It went on to say that, if it received the transfer agreement or the confirmation of appropriate independent advice form after 24 November 2018, then the transfer value would be recalculated.

The member disagreed with the Adjudicator’s decision and so the case was referred to the Ombudsman, who upheld the Adjudicator’s findings. The Ombudsman added:

2018. Under subsection 95(2) of the Pension Schemes Act 1993, confirmation is required from the trustees or managers of the receiving scheme that they are willing and able to accept the transfer in. It was reasonable for the transferring scheme to insist that it must receive the receiving scheme’s portion of the ‘transfer agreement’ by 24 November 2018. The member’s application to transfer was not valid until all of the required information had been provided.
2019. Whilst the member’s IFA asserted that other providers are willing to accept some of the documentation after the guarantee expiry date, the transferring scheme in question is not obliged to follow administration procedures used by other schemes. What matters is the administration procedures agreed between the transferring scheme’s Trustees and its administrators.