Ombudsman Confirms QROPS Transfer Rules

A ruling by the Pensions Ombudsman has confirmed that pensions in payment cannot be transferred to another scheme.

The decision should alert expats near to receiving benefits from a pension to make any transfer to an offshore Qualifying Recognised Overseas Pension Scheme (QROPS) before any payment is made.

Retirement savers have a statutory right to switch their pension funds between schemes, unless an exemption applies.

Exemptions include specific rules barring public sector or civil service pension transfers.

Pension rules also stop any fund transfer once a crystallisation event has taken place, such as the payment of benefits or a transfer to a QROPS.

Pension liberation switch

However, many retirement savers leave their pension decision until the last minute and could face losing the opportunity to shift their money overseas.

The ombudsman’s ruling came in the case of an anonymous ‘Mr I’ whose pension is part of the Banca Commerciale Italiana Retirement and Death Benefits Scheme (BCI).

Mr I wanted to switch his funds into a suspected pension liberation scheme, but the trustees denied the move as the pension was already in payment.

Technically, the transfer would have been disallowed by the accepting scheme, as The Pensions Regulator had already closed the pension to accepting new business.

Mr I complained to the trustees that his transfer was wrongly halted, but the claim was denied and his pension funds stayed with BCI.

No statutory transfer right

After that refusal, he complained to the ombudsman, who made a formal determination denying his claims.

“As payment of Mr I’s pension had started in 2012, it follows that he did not have a statutory right to transfer out after that,” the ombudsman said.

“Although the rules of the pension scheme gave the trustees discretion to allow a transfer even where there was no statutory right, they were entitled to use that discretion to refuse the transfer.

“I accept that it would have been frustrating for Mr I not to be able to make the transfer that he wanted, but the trustees had good reasons for not exercising their discretion.”

The ombudsman also expressed surprise that Mr I was still complaining after trying to switch his retirement savings to a pension liberation scheme which was under investigation and in the hands of trustees appointed by a regulator.