Trustees have been warned they could be penalised for taking more than a month to complete transfers after The Pensions Ombudsman upheld a complaint against Optimum Capital Ltd (OCL).
Scheme member Philippe Pollet had complained he had lost out because OCL, as principal employer and trustee of the Optimum Internal Pension Plan had failed to process his request to transfer to a Legal and General self-vested personal pension.
OCL said problems with the scheme's administrators - including Tudor Capital Management Ltd which set up and ran the scheme but was then suspended from acting as a trustee as two of its directors were ultimately jailed for fraud - left it unable to complete the transfer.
But Ombudsman Anthony Arter found that OCL had breached its duty by failing to complete the transfer and ordered it to pay Pollet £500 and compensate him for any loss caused by the delay.
Arter added that one month would have been a reasonable timeframe to complete the transfer - rather than the six-month maximum allowed in legislation - and this should be factored into the compensation.
Sackers associate director Arshad Khan said it was unsurprising that the Ombudsman had been unwilling to give the scheme six months, but that this case laid down an "important guide" for trustees.
He said: "It looks as though, in routine circumstances there will be a slight concern if it takes longer than a month to disinvest and make a transfer payment."
Khan added that the latest case showed excuses based on poor administration or switches of administrators would make "little headway" with the Ombudsman.
Pollet's financial adviser had originally contacted OCL about switching his money in October 2012 and formally requested a transfer the following July.
But OCL delayed the transfer while it sought legal advice in light of its problems with Tudor.
Tudor had been removed as a trustee with effect from 10 August 2010, and by a letter dated 22 February 2012, OCL removed Tudor as the scheme administrator. Plus Minus LLP was appointed as the new scheme administrator and was subsequently replaced by A.C.T.S. Global Limited, which also acted as the second trustee.
In September an OCL director wrote to Pollet, saying the firm was working on his transfer but if it was able to complete it, this could amount to a breach of trust, breach of duty, or maladministration.
He asked Pollet to therefore sign a declaration that he would take no action against OCL, and indemnifying the firm against any charges, costs, losses, penalties, fines, liabilities and expenses resulting from the transfer.
Pollet refused to sign and complained to the Ombudsman.
Arter found the requirement to sign this disclaimer was unreasonable and could not be used as a reason to delay or refuse the transfer.
In his written finding, Arter noted that Tudor had been removed as trustee and administrator by the time the transfer request was completed, so its involvement could not be used to excuse the delay.
He said: "It is inadequate for OCL to say that there was a problem with the administrator because as a current trustee OCL has a joint duty to comply - so OCL must process the transfer itself or appoint another administrator and make sure the transfer is completed."
Sackers' Khan said he had seen a growing number of complaints relating to slow transfers from members looking to access the retirement flexibilities introduced in April.
He said: "This sends a message to those involved in communicating with members. They should lay down a marker when members request a transfer, saying for example, ‘we can't guarantee how long the process will take - it could take anything up to six months, but we expect to complete it in less than three'."
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