Royal London Personal Pension Scheme No 2 · CAS-30095-H3Z1

CAS-30095-H3Z1

Ombudsman’s Determination Applicant Mr Y

Scheme The Royal London Personal Pension Scheme (No 2) (the Scheme)

Respondent Royal London

Complaint Summary Mr Y’s complaint concerns the encashment of his pension pot, following a fraudulent claim by his then wife. Specifically, he is seeking redress for:-

Summary of the Ombudsman’s Determination and reasons

Detailed Determination Material facts

Mr Y was a member of “The Scottish Life Personal Pension Scheme.” It was subsequently renamed “The Royal London Personal Pension Scheme (No 2)”.

1 CAS-30095-H3Z1 A deed of amendment adopting revised Scheme rules, dated 4 December 2006, names Royal London Mutual Insurance Society Limited as the Provider, Administrator and Trustee of the Scheme. Rule 2.1: Constitution of Scheme, states:

“Where the Scheme is established under trust, the assets of the Scheme shall be vested in the Trustee upon irrevocable trusts, to be applied in accordance with the Rules.”

Rule 25 of the Scheme rules (the Rules), “Alternative Application of Individual Fund”, provides, among other things, for payment of a serious ill-health lump sum.

On 19 October 2015, Royal London received an email from Mrs Y, claiming to be Mr Y, enquiring about serious ill-health benefits.

The email was from a Gmail account in Mr Y’s name. It said:

“hi there

I have a Scottish Equitable Policy in the name of [Mr Y] dob […], .I now live in New Zealand and have been trying to contact someone for a few weeks now and I am terminally ill with cancer and want to draw down my benefits. I have a letter from my specialist confirming my diagnosis so would urgently like to know how to draw this down

Thank you.

[Mr Y].”

Royal London received a second email from the same account. It said:

“hi there sorry i [SIC] meant to say the policy was with Scottish life. i [SIC] cannot locate the plan number.”

On 20 October 2015, Royal London received a further email from the same account. It said:

“hi there I have managed to find my policy number… I urgently need a response to this please. My life expectancy is less than 3 months and I need to make sure my wife and infant son are going to be okay financially once I have gone. I am attaching a copy of my doctors [SIC] letter [(the Letter)]

2 CAS-30095-H3Z1 confirming the same and need urgent confirmation on the next steps. MY time is limited and i [SIC] need to ensure that my wife and son are going to be okay. [SIC] thanks for your urgent reply and attention.”

“RE: [Mr Y]

The above mentioned patient is a married non smoking 46 year old male with a two year old son. He is currently under my care for acute lymphocytic leukemia [SIC] (date of diagnosis 18/11/2014) [SIC] All avenues for treatment up to this point have been explored and we are now at a point where the patient has become unresponsive to any treatment regime. In my expert medical opinion on examination today this patient has a life expectancy of 3-4 months and I feel it is prudent that any investments that are held are paid out urgently so that my patient can enjoy whatever time he has left with his wife and young son and is confident that they are financially secure when [SIC] is no longer around to provide for them. I thank you for your kind and urgent attention to this matter.”

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“Where you have reported the matter, please provide the case reference and contact details for the New Zealand police. Where you have not reported the matter, you are confirming by signature of this Authority that you understand that your failure to do so is relevant to the extent to which Royal London is able to escalate your complaint with the relevant authorities in the UK and support the investigation into any returns of funds.”

On 26 April 2019, Mr Y’s dispute with Royal London was referred to The Pensions Ombudsman (TPO) for investigation.

On 19 July 2019, Mrs Y pleaded guilty to the charge of ‘obtaining by deception’.

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Summary of Mr Y’s position

“the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either that the assets lost to the estate or compensation for the loss…That specific restitution is not possible then the liability of a trustee is to pay sufficient compensation to the trust to put it back to what it would have been had the breach not been committed. Common law rules of remoteness and causation do not apply; that is the liability is more than for other relationships in contract or general tortious duties of care. Thus, in paying the fund wrongfully the liability of the trustee is to restore the trust fund. This extends to making good the loss by restoration of any benefit or increase to which the trust would be entitled that is the loss at restoration and not at the date of deprivation.”

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Conclusions Breaches of trust

Mr Y contends that Royal London acted in breach of trust by wrongfully paying out his funds. Moreover, it delayed providing a remedy in breach of its legal duty to reinstate those funds. According to Mr Y and his Representative, the fact that Royal London has since restored the Fund is an admission of the alleged breach.

Although it has reinstated the Fund, Royal London has not admitted that it is at fault in the matter.

As the provisions of the Scheme are written under trust, there was a trustee- beneficiary relationship between Royal London and Mr Y. Consequently, the principal legal relationship in this case was a fiduciary one.

In cases where there is a breach of trust resulting in a loss of trust property, a beneficiary’s claim for that property is not comparable to a common law claim for tort damages. This is because the claim is not founded on an allegation of wrongdoing on the part of the trustees. The legal concepts of “remoteness” and “contributory negligence” have no bearing on the beneficiary’s claim and there is no need to identify fault or negligence on the part of the trustees.

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Consequential losses

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Directions

Anthony Arter

Pensions Ombudsman 28 October 2022

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