The ultimate lesson from the Royal London vs Donna Marie Hughes is that trustees need to apply their own oxygen masks before helping others, says Tom Barton, a partner at Pinsent Masons who worked on the case

There are an awful lot of unsung heroes and heroines in the trustee community, doing a first rate job for the members they look after. This often means, behind the scenes, going above and beyond in the line of duty.

Running contrary to this ethos is a requirement to process statutory transfer requests, despite reservations about the consequences. The High Court has now made it abundantly clear that trustees cannot deny members their statutory transfer rights.

Tech briefing

Previously trustees might well have sought to protect members by declining transfers for technical reasons referred to by the Pensions Ombudsman in a series of determinations last year.

In very broad summary the Pensions Ombudsman had said that a statutory transfer right only existed where the member had some genuine employment relationship (and critically some earnings to go with it) in relation to the receiving scheme.

The High Court has now made it abundantly clear that trustees cannot deny members their statutory transfer rights”

Not so, says the High Court. Consequently, trustees are left with little choice but to process suspicious statutory transfer requests.

But beware the loopholes in the loopholes. The High Court judgment is not of universal application to all transfer requests. There are a good few scenarios which don’t quite match the circumstances considered by either the Pensions Ombudsman or the High Court.

In such cases, there might well be no statutory (or other) discharge to rely on. It will require a thorough going over of transfer processes to guard against associated risks.

The good news (of sorts) is that with every statutory transfer comes a statutory discharge. From the trustees’ perspective, this reduces a lot of the risk associated with transfers to suspect schemes. But it doesn’t do a lot for members.

In some cases members are not just unwitting – they seem almost determined to fall prey to high risk and even illusory investments with the promise of stellar returns.

This is not just about pre-55 access anymore. The best form of risk protection for all concerned (except the scammers) is that members’ heads are not turned in the first place. Unfortunately members will not always be best placed to make their decisions wisely.

The best form of risk protection for all concerned is that members’ heads are not turned in the first place”

This isn’t just a concern from a liberation perspective, it’s also a concern from a retirement freedoms perspective too. There are quite a few ways that pension savings can disappear these days, and not all of them involve a scam.

What are the practical things trustees can do?

As a starting point, it’s worth thinking about whether the scheme communications really equip members to make good decisions. This isn’t just about disclosure requirements and mandatory risk warnings. The boxes may all be ticked – but has it all had the desired impact?

Different media and content can be used to reach people in different ways. More meaningful risk protection will involve a careful balance of style and substance.

Alas, communications can also be a minefield for trustees too.

Beware inadvertent financial advice, misrepresentation and (as has been threatened by various suspected scam organisations) straying into libel territory.

So ultimately even the solution comes with its own risks. But then that has always been the case with pensions liberation scams. The message to trustees is don’t forget protect yourself, when you’re looking after other people’s interests.

Tom Barton is a partner at Pinsent Masons