Pensions Ombudsman awards compensation for investment losses due to transfer delays

7 minute read
15 September 2020


In Mr T (CAS-38354-V5L) the Pensions Ombudsman ordered James Hay to pay compensation for the financial losses Mr T had suffered due to unreasonable delays in processing his transfer request, as a result of which Mr T had lost the opportunity to make a profit by investing in the stock markets following the Brexit referendum.


The facts

Mr T was a member of a Small Self-Administered Scheme administered by James Hay (the "SSAS") through which he held cash and stocks with Barclays Stockbrokers ("BSB"), together with additional cash of approximately £220,000.

On 24 March 2016 Mr T emailed James Hay to start the process of transferring his funds from the SSAS to a Self-Invested Personal Pension with Hargreaves Lansdown (the "SIPP"), having received notice that BSB would be closing its pension trader account from 30 June 2016. Mr T expected to receive the funds in the SIPP before or shortly after the Brexit referendum on 23 June 2016. If the UK voted to leave the EU, Mr T intended to invest in the FTSE 100 Index (the "Index") to take advantage of the anticipated fall in the Index and then sell once the Index had recovered.

Although Mr T had chased James Hay several times, drawing attention to the significance of the referendum and his proposed investment strategy, James Hay did not receive anything from the BSB portfolio until 11 July 2016 when the cash element of Mr T's investment was transferred. On 19 August 2016 James Hay transferred £250,000 in cash to the SIPP and on 26 August 2016 six out of seven lines of stock were transferred, the final line being transferred on 3 October 2016.

By the time Mr T had received funds into the SIPP the Index had recovered and he did not make the investment he had planned.

Mr T complained that, due to the delay in the transfer of his funds, he had lost the opportunity to pursue his investment strategy. James Hay admitted maladministration and offered £100 in compensation. Mr T complained to the Pensions Ombudsman.

The Pensions Ombudsman's original determination

In his original determination the Ombudsman found that James Hay had been guilty of maladministration by causing undue delay in the transfer of Mr T's pension to a new provider. However, although the Ombudsman concluded that Mr T had lost the opportunity to invest in the stock market, his award was limited to £2,000 for distress and inconvenience and did not include any investment losses. This was because, the Ombudsman held, the loss of the investment opportunity was not measurable and the exact nature of Mr T's investment was not within the reasonable contemplation of the parties or reasonably foreseeable because Mr T had not informed James Hay of the specific shares he intended to purchase in the aftermath of the leave vote.

Appeal to the High Court

Mr T appealed the determination to the High Court, which allowed the appeal on the grounds that the Ombudsman had erred in law when considering whether the loss Mr T had suffered was measurable and reasonably foreseeable.

The Court held that, when an investor asks for their pension pot to be moved to another provider, it is obvious that such a transfer is for the purpose (or possible purpose) of investment. It is equally obvious, the Court found, that, if the transfer is delayed, the investor will or may lose the opportunity to invest over that period and, if there are spikes in the market, it is likely and foreseeable that the delay will cause loss.

The Court also found that, in determining whether Mr T's loss was measurable, the Ombudsman had set the bar too high in requiring evidence of the shares Mr T intended to purchase following the Brexit vote.

The Court remitted the case back to the Ombudsman directing him first to identify the date on which the funds should have been transferred. Once that date had been established, Mr T had the burden of proving, on the balance of probabilities, what he would have done with the funds. If he could show he would have invested the money, he did not have to show which shares he would have bought and the Ombudsman could consider factors such as the nature of Mr T's portfolio at the time and his investment patterns.

The Pensions Ombudsman's second determination

The Ombudsman held that, had there been no maladministration by James Hay, Mr T's transfer request would have been completed by 23 June 2016. On the balance of probabilities Mr T would have invested the full £250,000 in the Index immediately after the leave vote (when the Index fell to 5,788). In doing so, he would have made a profit of £43,700 in August 2016 following the Index's subsequent recovery to 6,800. The Ombudsman directed James Hay to pay into the SIPP £43,700, together with interest at 8% per annum from August 2016 to the date of payment.

Since the Ombudsman had previously awarded Mr T £2,000 for the distress and inconvenience he had suffered, no further award for that non-financial loss was made.


The decision in this case might be a fair one on the facts, Mr T having drawn James Hay's attention to the significance of the Brexit referendum in the context of his proposed investment strategy. However, the test the Court laid down for the Ombudsman to apply in considering a complaint based on investment loss extends beyond the somewhat unusual facts of the case.

In particular, having established the date on which the funds should have been transferred, it appears from what the Court decided that to establish his complaint it was sufficient for Mr T to prove what he would have done with the funds, even if the scheme's administrator had no reason to foresee that the funds would be invested in the way Mr T had intended.

In these challenging times (for example, increases in transfer requests, administrative difficulties arising from COVID-19 and the need to be vigilant given the rise of pension scams) schemes are likely to take longer to process transfer requests or switch investments in DC schemes. This case is a somewhat stark reminder to trustees and administrators that they might face complaints seeking compensation for investment losses if they delay in effecting requested transfers.

One way in which trustees and administrators may seek to minimise the risk of being required to pay compensation for lost investment opportunities would be to ask members when they request to transfer whether the request carries any particular urgency or whether there is a specific time-frame by which the transfer needs to be effected. In the absence of such information being provided by the member, it may be difficult later on for them to recover compensation of the kind awarded to Mr T.

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