Aegon Flexible Pension Plans · CAS-73420-M3P0

CAS-73420-M3P0

Ombudsman’s Determination Applicant Mr E

Scheme Aegon Flexible Pension Plans (the Plans)

Respondent Aegon

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

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• A transfer instruction signed by Mr E on 27 January 2015 was included.

• None of the information on the forms was pre-populated.

• The SIPP’s HM Revenue & Customs (HMRC) registration certificate was provided. This showed that it was registered on 23 April 2012 with a pension scheme tax reference of 00783372RA.

• Gaudi was the SIPP’s provider and administrator, and Gaudi Trustees Limited was its trustee.

• Mr E had been the victim of a scam. With the exception of the benefits he had taken in 2019, this had resulted in the loss of £686,408.21.

• The transfers took place after February 2013, when The Pensions Regulator (TPR) had issued its ‘Pension liberation fraud - The predators stalking pension transfers’ guide (the 2013 Guide). There were a number of red flags which Aegon should have been aware of, and which should have resulted in the case being referred to its Financial Crime Team (the FCT).

• Aegon had no evidence of regulated advice being provided to Mr E. The Agent, who had provided Mr E with financial advice, had been an authorised and regulated independent financial adviser until 2009. Aegon did not check who he was. Mr E had no reason to transfer his benefits out of the Plans had he not been persuaded to do so by the Agent.

• While Aegon may not have been able to refuse the transfer, it should have done more to ensure that Mr E was able to make an informed decision. This included issuing a disclaimer for him to sign.

• Aegon did not engage with Mr E in relation to his transfer request, either by telephone or letter. 2 CAS-73420-M3P0

• It was not clear to it how WRAL concluded that the transfers were obvious scams.

• Its due diligence process included checking:-

o Whether the receiving scheme was on its internal list of high-risk schemes which was compiled from its own investigations and industry shared knowledge. Neither the SIPP, Gaudi nor Gaudi Trustees Limited appeared on the list.

o The receiving scheme’s HMRC registration and whether it had been established in the last 12 months. The SIPP had been registered on 23 April 2012, more than two years before the transfers took place.

o Whether the financial adviser, the receiving scheme or the scheme’s administrator were authorised by the Financial Conduct Authority (FCA), and so subject to its regulations. Gaudi had been regulated by the FCA since July 2009. At the time of the transfer, it had not been made aware whether Mr E was receiving regulated financial advice.

• Where there were concerns, these would be raised with the FCT who would perform additional checks, including contacting the customer to discuss the transfer. In the case of Mr E’s transfers, no concerns were identified.

• The SIPP was still an ongoing concern and Gaudi continued to file annual accounts and remained authorised with the FCA. Mr E should make his claim to Gaudi.

• It had no duty of care regarding the selection and performance of investments in a plan held with another provider.

• Mr E’s application to transfer met the statutory requirements for it to proceed. It had no discretion to refuse it.

WRAL made the following additional submissions on behalf of Mr E:-

Having reviewed a recording of the Telephone Call:-

• While the caller had identified himself as Mr E, Mr E identified the caller as being the Agent. 3 CAS-73420-M3P0 • The security checks involving name, address and date of birth were not adequate as this was information that was readily available to the public.

• There were many concerns including the caller declining to provide details of his email and telephone number. The caller had also given evasive and nervous responses, used technical jargon and provided a plan number without being prompted.

Aegon should have issued Mr E with a copy of the ‘Predator’s stalk your pension’ leaflet (the Scorpion Leaflet) or equivalent advice should have been provided.

If Aegon had talked to Mr E and indicated that a scam may be in progress, he would not have proceeded with the transfers.

Aegon made the following additional submissions:-

In relation to the Telephone Call:-

• Its security checks had included the provision of a plan number, date of birth and home address. The caller went through the checks with no hesitation. It would not expect customers to make plan numbers publicly available.

• The checks were in line with those performed by its FCA regulated competitors.

• It questioned whether the Agent had been given the plan numbers and permission to contact Aegon by Mr E and, if not, whether the matter had been reported to the police.

• The caller had requested transfer quotes and valuations for the Plans. The Telephone Call did not form part of the transfer request process.

4 CAS-73420-M3P0 It had not been made aware of any attempt by Mr E to access benefits before age 55 or of any offer of a cash incentive made to him.

It had subsequently been informed that the Agent was known to Mr E as they were both associated with the same social club.

Adjudicator’s Opinion

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• In the Adjudicator’s opinion, the security checks undertaken by the call handler were adequate. The caller provided his name, date of birth, home address and a plan number. The last of these items would not have been readily available to the public.

• Mr E subsequently identified the caller as being the Agent. If this was the case, then it was unacceptable for the Agent to be impersonating Mr E. However, the Adjudicator did not take the view that the call handler should have been aware that the caller was not Mr E.

• The Adjudicator was not of the opinion that the caller’s reluctance to provide email and telephone details was a concern as some people do prefer to receive letters. The call handler could not be expected to know information about Mr E such as whether he was familiar with some pensions jargon or whether he was nervous on the telephone. So, the Adjudicator did not take the view that these were warning signs. Nor was he of the opinion that the caller providing a plan number without being prompted was unusual behaviour. The caller was likely to be aware that the call handler needed this information to deal with his enquiry.

Aegon’s policy at the time that the transfer packs were requested was to only issue a copy of the Scorpion Guide where a risk had been identified. In the case of Mr E, as no such risk had come to light, he was not sent the Scorpion Guide. The Adjudicator also noted that Gaudi was FCA registered. In his opinion, it was therefore reasonable for Aegon to expect that the SIPP was being run in a manner consistent with the FCA’s standards.

Mr E did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider.

WRAL provided further comments on behalf of Mr E in response to the Opinion. These are summarised in paragraphs 42 to 68 below:-

6 CAS-73420-M3P0 The Adjudicator’s Opinion was at variance with a number of previous Pensions Ombudsman’s Determinations.

Aegon had completed the transfer of Mr E’s benefits to an unknown SIPP provider without making any enquiries apart from checking that Gaudi was authorised by the FCA. It had not attempted to contact him to discuss the transfer; nor did it question who was advising him. It had also not referred the case to its FCT.

The transfer packs requested on 14 January 2015 were never sent, meaning that Mr E never received anything directly from Aegon. This was maladministration.

In order to receive the transfer payments, the Agent had been able to download the transfer forms from Aegon’s website. He had then inserted information he had obtained from the Telephone Call during which he impersonated Mr E. The fact that the information was not pre-populated on the transfer forms should have been a red flag for Aegon. This should have prompted it to have sent the Scorpion Leaflet to Mr E.

In a previous Determination it was stated that: “the Scorpion warnings were designed to be sent individually to scheme members” and were the ‘bare minimum’ that firms should have done to protect their customers. However, Aegon did not send the Scorpion Leaflet to Mr E. Nor had it provided him with any similar warnings.

Aegon and the Adjudicator incorrectly took the view that checking that Gaudi was authorised fully discharged Aegon’s duty of care.

In relation to the unsent Scorpion Leaflet, Aegon raises the risk that its issue would have delayed the transfer and introduced a competing risk of fund value movements. However, the risk of Mr E losing a sum in the region of £686,000 should have taken priority. In a previous Determination, PO-26616, it was stated that “the overall tone of the 2014 Action Pack is for the transferring scheme to engage with the member to understand the transfer”. Mr E’s funds would have remained invested during any delay. There was no need for a delay anyway as all that was needed was for Aegon to make a telephone call to Mr E.

Had such a telephone call taken place, Aegon could have asked the name of the Agent who was advising Mr E and it could have checked this name against the FCA register. It should have also questioned the SIPP’s underlying investments. Asking these questions would have identified the name of an unregulated adviser and a purported fixed return on an overseas investment which would have identified it as a scam. Aegon could not ‘understand the transfer’ without some reference to what Mr E was planning to do with the money and who was advising him.

In explaining why it did not issue a Scorpion Leaflet to Mr E, Aegon said that Gaudi did not fit the profile of a scam provider. This was not the case as it fitted that profile exactly.

7 CAS-73420-M3P0 The fact that the Agent was an acquaintance of Mr E was not relevant as it was a common tactic of scammers to befriend their victims. It was the fact that he had not been authorised since 2009 that was relevant.

The fact that Aegon was checking Gaudi on the FCA register was an indication that it had not heard of Gaudi before. This was a red flag.

Aegon’s response to Mr E’s complaint of 8 April 2021 had said that, as the transfers met the statutory requirements for it to proceed, it had no discretion to refuse them. This was only superficially true as Aegon was not prevented from raising concerns with Mr E, and it could have issued him with a disclaimer to sign.

The Adjudicator had referred to the Determination of case PO-16475. However, this case has nothing in common with that of Mr E. In particular, in Mr E’s case there were multiple red flags that pointed to the need for Aegon to do more. These were not present in PO-16475. Mr E’s case took place two years later, so any grace period given to implement procedural changes to issue the Scorpion Leaflet no longer applied. Furthermore, more knowledge was available in relation to pension scams. The 2013 Guide, which largely alluded to ‘liberation’, had been revised in July 2014 to cover the kind of scam that Mr E had been the victim of.

Previous Determinations, including CAS-43847-P7M0, referred to ‘proportionate’ due diligence processes. The primary test of proportionality is the sum of money involved which, in Mr E’s case, was over £680,000. This should have been reflected in the level of due diligence undertaken by Aegon.

In past Determinations, weight was repeatedly given to a failure to communicate the warnings in the Scorpion Leaflet to the complainant. The picture of a scorpion on the front and the words “Predators stalk your pension” were an indication why. The 2014 Guide suggested some common features of pension scams, a number of which applied to Mr E’s transfer, including:

• the use of phrases like “one-off investment opportunities”;

• transfers of money or investments overseas;

• no member copy of documentation provided; and

8 CAS-73420-M3P0 • victims being encouraged to speed up the transfer of their money to the new scheme.

• connected to an unregulated investment company;

• hints at unusual, creative or new investment techniques;

• being contacted by an introducer;

• being advised by a non-regulated advisor; and

• taking no advice.

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“… this is missing the point. It was Liberty’s responsibility to put Mr E in a position where he could make an informed decision and it failed to do so.”

Aegon provided further comments which are summarised in paragraphs 70 to 82 below:-

• checked that the SIPP provider was authorised;

• sent Mr E the Scorpion Leaflet;

• telephoned Mr E to ask who was advising him; and

• referred the matter to its FCT.

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• claim that benefits can be accessed before age 55;

• make an approach out of the blue;

• offer upfront cash; and

• offer a free pension review or a one-off investment opportunity.

“The FCA also regulates those responsible for operating SIPPs, personal – and contract – based stakeholder pension schemes. If you are concerned that a member of your scheme may have been targeted by a scam, you can check whether the receiving pension provider is authorised by the FCA.

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HMRC has introduced checks on all applications to register a pension scheme and monitors activity throughout the life of a registered pension scheme. If HMRC does not believe a scheme is being set up as a genuine pension scheme, it will not register that scheme.”

I have considered the additional points raised by WRAL and Aegon, however they do not change the outcome. I agree with the Adjudicator’s Opinion.

Ombudsman’s decision

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• not reviewing matters with the benefit of hindsight;

• the statutory duty to complete a transfer unless indicators of why it should not go ahead exist; and

• the two-stage process for due diligence suggested in the Scorpion Leaflet.

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I do not uphold Mr E’s complaint.

Anthony Arter CBE

Deputy Pensions Ombudsman 23 August 2023

15 CAS-73420-M3P0 Appendix Extract from the Financial Services and Markets Act 2000

“Part II Regulated And Prohibited Activities

19 - The general prohibition

(1) No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is -

(a) an authorised person; or

(b) an exempt person.

(2) The prohibition is referred to in this Act as the general prohibition.”

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