Scottish Widows Personal Pension · CAS-72785-M0F1

CAS-72785-M0F1

Ombudsman’s Determination Applicant Mr T

Scheme Scottish Widows Personal Pension (the Scheme)

Respondent Lloyds Banking Group PLC (Lloyds)

Outcome

Complaint summary

Background information, including submissions from the parties On 1 October 2016, Mr T became a member of the OSM Aviation Group Personal Pension Plan (the OSM Plan). The OSM Plan was administered by Scottish Widows, which is part of Lloyds.

On 22 December 2016, Mr T transferred the value of a pension arrangement he had with Friends Life into the OSM Plan. The total amount transferred was £29,160.62.

In June 2018, Lloyds received notice from Mr T’s employer that he had left its employment.

On 27 June 2018, the OSM Plan became a paid-up personal pension plan, under the name of the Scheme, following receipt of the last employer contribution.

On 30 March 2021, Mr T telephoned Lloyds to enquire whether he could receive his Scheme pension early.

On 31 March 2021, Lloyds confirmed to Mr T that he could not access his pension before age 55, unless he suffered from serious ill health, or the Scheme had a protected retirement age.

1 CAS-72785-M0F1 On the same date, Mr T raised a complaint as he was not satisfied with Lloyds’ response. He said that he wanted to access his pension before age 55 due to financial difficulties.

On 6 April 2021, Lloyds responded to Mr T’s complaint. It did not uphold it for the following reasons:-

• On 6 April 2010, legislative changes increased the minimum retirement age to 55. This could potentially rise to age 57 from 6 April 2028.

• As Mr T’s funds were held in a “pension wrapper,” he was unable to access them before age 55, which was a rule for everyone.

Mr T’s position

Due to the pandemic, he lost his job in March 2020. The lockdowns caused a significant impact on his career and finances, which was the reason he sought to access his Scheme benefits early.

While accessing these benefits early may not be the best course of action, it is one of few options that can prevent potential financial ruin for him. The alternative may lead to an inability to seek further employment in his profession and should be avoided at all costs.

The value of his Scheme benefits was approximately £45,000. In an attempt to settle arrears with creditors, he approached Lloyds to discuss a full or partial withdrawal of his pension fund as an unauthorised withdrawal.

Government legislation indicates that an unauthorised withdrawal can be made, subject to tax implications, which he was happy to accept. The Finance Act 2004 allows this, as well.

Lloyds’ decision must be overridden. It should be his right to access his pension fund under these severe and exceptional circumstances. Retaining his pension is of no benefit to him at this stage. It makes more sense to be able to accrue pension benefits again once he is able to find work again. Otherwise, he will have to “rebuild a destroyed credit record” through potential bankruptcy.

The issue had caused him ill health and distress.

Lloyds’ position

While the option of an unauthorised payment is permitted by the Government, as a company Lloyds is not obliged to offer this option. It has taken the decision not to offer this option as it was likely that 70% of any payment would need to be paid as tax, comprised of an unauthorised member payment tax of 40%, a surcharge of 15% and a net scheme sanction charge of 15%. In its view, a tax deduction of 70% would be of no benefit to any of its customers, which is why Mr T’s request had been declined.

2 CAS-72785-M0F1 It had explained to Mr T that the only way he could access his pension before the current government minimum retirement age of 55, is if he was suffering from serious ill health or his pension had a protected retirement age of less than 55. Neither of these criteria had been met.

Adjudicator’s Opinion

1https://www.legislation.gov.uk/ukpga/2004/12/part/4/chapter/3/crossheading/authorised- member-payments

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• Section 1(c) of the Act clearly shows a process for unauthorised withdrawals. Whilst being unauthorised, this does not mean it is not permitted.

• An article in FT Adviser 3 states, “The most obvious example of an unauthorised payment would be a member withdrawing money from their pension before age 55.”

• Lloyds’ refusal to allow him to take his benefits before age 55 was done for the purpose of “profiteering” rather than taking an objective view to observe the situation at hand, and an attempt to protect the client from financial distress.

Mr T did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr T provided his further comments which do not change the outcome. I note the additional points raised by Mr T, however, I agree with the Adjudicator’s Opinion and.

Ombudsman’s decision I understand Mr T’s disappointment that Lloyds did not agree to pay his benefits as an unauthorised payment and acknowledge that Mr T accepts that he would be liable to pay a tax charge as a result of the unauthorised payment. However, I find Lloyds acted reasonably in not agreeing to make such a payment to Mr T.

Lloyds explained the possible implications that could result from it making the unauthorised payment which included putting the Scheme at risk of being deregistered by the Financial Conduct Authority and the Scheme incurring a surcharge.

Lloyds must not intentionally make decisions that may have an adverse effect on its members or the Scheme. There are clearly defined and regulated circumstances when a member can receive their retirement benefits before age 55. Lloyds has acted in accordance with legislation and the Scheme Rules by refusing to pay Mr T his benefits before age 55, as an unauthorised payment.

2 https://www.gov.uk/guidance/pension-schemes-and-unauthorised-payments#what-is-an-

unauthorised-payment 3 https://www.ftadviser.com/pensions/2020/07/07/beware-of-unauthorised-pension-

payments/ 4 CAS-72785-M0F1 I do not uphold Mr T’s complaint.

Anthony Arter Pensions Ombudsman 17 October 2022

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