The timing of investments is becoming a new and expanding field for the Pensions Ombudsman, it seems, and it is yet unclear if the field will turn out to be a minefield. After the Brexit referendum case, there has been a further complaint around a transfer delay and subsequent losses from missing a market opportunity, causing nervousness in the industry. 

 

In August last year, a High Court ruling from a case brought in 2019 about investment timing stirred up the pensions world. Mr John Tenconi had complained to the Pensions Ombudsman that delays from his provider meant he could not invest just after the Brexit referendum of 2016, when markets fell, to then benefit from the subsequent recovery.  

 

The ombudsman initially rejected his claim for compensation of being prevented from timing the market, saying the loss was “neither measurable nor the exact nature of his investment within the reasonable contemplation of the parties”. However, the High Court overruled TPO, and James Hay Partnership, the scheme provider, was ordered to pay the substantial sum of £43,700 plus interest into Mr Tenconi’s new pension plan. 

 

 

It seems this ruling will have longer lasting effects, as the ombudsman is now offering the potential for compensation in a similar case, so long as the claimant can prove his intention to invest in a specific way. 

 

In a case involving Curtis Banks, Mr E complained about delays to a transfer from his SIPP. Part of the complaint involved the cash element of the SIPP, which he said he intended to invest in March 2018, but by the time he received it in October 2018, markets had risen and the opportunity had gone. 

 

The ombudsman awarded £500 in compensation for the distress, but crucially added that if Mr E can “provide satisfactory evidence within a reasonable timeframe” that he suffered a loss due to the delay, the provider should compensate him for this. 

 

The statement seems to imply that Mr E did not provide proof of a loss – and therefore his intention to invest in a specific way – at the time the case was heard. The determination means all hangs on what will count as “satisfactory evidence”. 

 

“It means the member and Curtis Banks can disagree about what’s sufficient proof of loss in six months’ time,” said Arshad Khan, senior counsel at law firm Sackers, when further litigation might ensue. “I can well see that happen, given the direction from TPO was a bit vague on that aspect,” he said. 

 

 

Compensation for loss is a point of principle, but how it is applied to DC investors is new, and could have considerable financial impact on firms. In volatile markets, investment losses can quickly ramp up within a short time – if a member is due to transfer a six-figure sum, this could easily lead to substantial compensation claims if there is a delay and they can prove their intention to time the market. 

 

“The slapping down TPO got from court in that Brexit case was a bit of a turning of the tide,” said Khan, noting that before then, it was an uphill battle for people to prove their loss. Since the Brexit case, the ombudsman “has been slapped down enough to give members more of a pass through”. 

 

The investment timing cases have given some cause for nervousness among trustees, but at the moment are limited to SIPPs and contract-based pensions, Khan said, adding: “That'll be an interesting line of distinction, if they have complaints do they go to TPO, or [will] trustees want to settle before it goes to investigation.” 

 

Schemes should always clearly communicate the timeframe for a transfer, he advised. “If you are doing due process and communicate you should not have a problem”, he said; nonetheless, the case around the Brexit referendum has “opened a bit of a Pandora’s box”. 

 

There is a statutory time limit of three months on pensions transfers, and where there is a delay, “the members will probably be looking at all the reasons for the delay and trustees and administrators will look at, ‘Can we justify it’”, he noted, as part of an assessment of whether the delay is excusable.