The Pensions Ombudsman will participate in more appeals where there is a wider public interest, but how far will the service go? James Phillips reports
The Pensions Ombudsman's (TPO) decision to participate in more appeals against its decisions has excited people across the industry, with expectations it could deliver better judgements for savers.
The decision was provoked by the conclusion of the Hughes v Royal London case, where TPO's decision to allow a transfer to be blocked was discarded in the High Court in February.
The ruling set a precedent and has made it significantly harder for scheme trustees to overrule members where their funds are targeted by scammers.
But now, ombudsman Anthony Arter (pictured) has declared the office will intervene in appeals against his decisions where there is a public interest case for doing so, such as in the Hughes case.
So, when will TPO get involved, and what factors should it take into consideration?
TPO's finances are not infinite, and to make the most out of its interventions it will need to thoroughly consider the merits of getting involved. However, there is a danger that participating in appeals in one case may lead to an expectation it will also get involved in others.
Legal director Claire Ryan states TPO will make its decisions on a case-by-case basis, and emphasises its involvement will be more commonly assistive rather than defensive.
She says: "When TPO does exercise its power, we will be doing so very sparingly. The reason why we would participate, other than cases where it affects our jurisdictional process, is because we would look to assist the court. In doing this, we don't want to be partisan or defend our decision.
"But also, judges will not always have pension expertise because they pick up cases like a taxi rank. Then, the ombudsman can assist the court by providing a balance of arms. That is the overarching principle of our decision."
She adds the assistive nature of its interventions will ensure cases do not become too protracted, saving time and money for all parties.
Eversheds partner Jennifer Miles agrees this is the correct approach.
She says: "TPO's office has been clear to say he won't be supporting either party in any event where he looks to make representations on appeal. The way it has been positioned is he will look to assist the court. I don't think you would necessarily have the argument that he would get involved in ‘x' issue because he got involved in another."
The assistive approach is meant to be unbiased, ensuring justice prevails and TPO does not create a culture of being expected to get involved where a case is similar to one it has previously intervened in.
But another aspect of the assistance is it will help ensure a balanced argument with an informed judgement.
Ryan states TPO will ensure all arguments are heard, especially when complainants are unable or unwilling to attend court.
"There will be a range of circumstances that we've looked at and considered. One would be the equality of arms issue," she says. "TPO is meant to be an accessible alternative to the courts and there's an irony that the parties might end up in court. Impoverished complainants run the risk of costs against them if they lose, and will not want to participate in the court against an appeal.
"If the complainant does not attend court, then to provide the access to justice that parliament intended when it created the ombudsman, you need the ombudsman there in a neutral position to continue that route of justice."
In particular, the ombudsman's presence may help guide debate in the courts in a more objective manner where the judge is not experienced on the topic. The parties who may be involved in the case will not necessarily consider the wider impact of a decision, and just consider their own situations. Therefore the ombudsman can help ensure all potential consequences are considered.
Pinsent Masons partner Ben Fairhead says TPO's involvement can be beneficial in these situations.
"The judges are usually very well-grounded and experienced in a variety of matters, and many will be familiar with pensions and trust matters. But sometimes you may get a judge who needs a bit more guidance through the background and implications their decision is likely to have on the industry.
"The ombudsman is experienced and specialised in pensions. In some situations, if the ombudsman's determination is being appealed he may feel he can add some benefit by being represented and providing assistance to the court.
"The parties involved are looking at how it is impacting on them specifically. It's not their role to be mindful of the wider impacts on the industry, which may be a factor that gets taken into account by the judge. The ombudsman may come in as an independent party with an objective view on the situation."
Eversheds' Miles says in situations where legislation is not clear, trustees may prefer the decision is made by the ombudsman.
She says: "The preference would be for the legislation to be clear rather than for TPO to have to try to find a way through it.
"Where that doesn't exist – which is the situation in relation to pension liberation –any guidance or setting of precedent that helps those who wish to transfer and those concerned there may be fraud is always welcome.
"Otherwise you have an area of uncertainty that means people don't know what to do and it causes issues. That's why there are so many complaints to TPO, because trustees and administrators would rather the ombudsman made a determination than someone coming back after a transfer and saying, ‘this is fraud and you should have stopped me'."
Perhaps for this reason, TPO has stated it will seek to intervene where it believes an important position can be made, particularly where it can affect the industry as a whole, such as in the Hughes case.
Assessed on a case-by-case basis, the ombudsman hopes such an approach will clarify grey areas of the law, thus setting a precedent or provoking a legislative response.
"Another situation TPO will get involved is where the ombudsman has established a position," Ryan says. "In the Hughes case, the ombudsman established a point vis-à-vis pension liberation. Its role is to provide unlegalistic justice and explore the limits of the legislation in order to be able to achieve the right outcome. If it had done that and pushed the boundaries that would be a reason why the ombudsman would look to participate."
Within its original announcement, the ombudsman pointed towards areas such as pension liberation and auto-enrolment (AE) as topics it would be particularly interested in getting involved in. This is likely due to the topics being fairly new, where there can be some grey areas in how the law is interpreted.
This is the view TPO took within the Royal London case, where the ombudsman made its determination with a view the law was not clear whether trustees can block transfers if they believe it is in members' best financial interests.
Fairhead says the ombudsman can help interpreting the law in these somewhat unknown areas.
"It's interesting the ombudsman has mentioned liberation and AE," he says. "These are relatively new phenomena where the law is maybe a bit less settled, and it's being asked to determine points which have not necessarily come up before.
"Pension liberation has been around for a fair while, but the determinations related to transfer requests have only been in the last couple of years."
But court action is costly for losing parties, so the ombudsman will have to be careful not to take a defensive stance where there is a high risk of losing. This is the reason TPO has said it will assess each case for its own merits.
Its decision to take a more interventionist stance certainly has the potential to have a wide range of effects on the industry, but where TPO will intervene is far from conclusive. Time will tell which cases it gets involved in and how far it will make representations in the court.
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