Hughes v The Royal London Mutual Insurance Society Limited – 19 February 2016

The High Court has overturned a decision of the PO which had allowed a scheme’s trustees to decline a member’s transfer request where there were concerns about the possibility of a pensions scam. The court disagreed with the PO’s interpretation of the relevant legislation.


Is there a statutory right to a CETV?

The starting point for trustees dealing with a transfer request is that they have a duty to pay a CETV where the relevant legislative requirements are met.

To satisfy the statutory requirements for a CETV, the transfer must be to a registered occupational or personal pension scheme. Broadly, under case law, to be an occupational pension scheme, a scheme must have been established:

  • “for the purpose of providing benefits to, or in respect of, people with service in employments of a description or for that purpose and also for the purpose of providing benefits to, or in respect of, other people” (the “purpose issue”); and
  • by, or by persons who include, a person to whom section 1(2) of the Pension Schemes Act 1993 applied when the scheme was established (broadly, where there is an employment relationship) (the “founder issue”).

Will the CETV be used to secure transfer credits in the receiving scheme?

The individual’s CETV must be used for acquiring “transfer credits” in an occupational pension scheme or “rights” under a personal pension scheme.

The term “transfer credits” in the Pension Schemes Act 1993 is defined by reference to the definition of “earnings” in the Social Security Contributions and Benefits Act 1992. This definition includes “any remuneration or profit derived from an employment“. In turn, “employment” is defined to include “any trade, business, profession, office or vocation”.


Ms Hughes, a member of a personal pension scheme administered by the Royal London Mutual Assurance Society (Royal London), requested a transfer to the Babbacombe Road 1973 Small Self Administered Scheme (the SSAS), an occupational pension scheme. Royal London refused to make the transfer owing to concerns that the receiving scheme might be a vehicle for a pension scam (or pension “liberation”). Royal London also questioned whether Ms Hughes had a statutory right to a transfer because she was not an “earner” in relation to the SSAS.

PO determination

The PO dismissed a complaint by Ms Hughes in June 2015.

While the PO was satisfied that the SSAS was an “occupational pension scheme”, he held that for Ms Hughes to be “an earner” within the definition of “transfer credits”, she had to be an earner in relation to a scheme employer in relation to the SSAS. Although Ms Hughes was “apparently employed” by the principal employer of the SSAS, she did not receive remuneration from that employer. In the PO’s view, this meant she was not an earner in relation to a scheme employer and therefore did not have a statutory right to a transfer. The PO did not make an express finding as to whether she was an “earner” on the basis that she had earnings from another source.

Ms Hughes appealed, arguing that the PO had wrongly construed the definition of “transfer credits” and that she was an “earner” within that definition, even though her earnings did not come from a scheme employer in relation to the SSAS.

High Court decision

The judge noted that “it is sometimes possible for a court to supply missing words in a statutory provision” but was not satisfied that, in the circumstances, it was open for him to read words into the definition of “transfer credits” (as the PO had done). “Earner” therefore had to be given its general meaning.

As it was agreed that Ms Hughes was “an earner by reason of her earnings from another source or sources”, the judge found that she was entitled to require Royal London to transfer her personal pension scheme benefits to the SSAS.


This decision clarifies the position for trustees and administrators on the parameters for paying a CETV and has been welcomed by the PO for the instruction it provides. The PO notes that “it seems likely that most transferring members will meet [the earnings] requirement so, beyond verification of earnings and the provision of risk warnings, trustees and administrators will be conscious that under current legislation they cannot refuse such a transfer – even if they have significant concerns that it may be for the purposes of pension liberation”.

The important thing for trustees and administrators remains the duty to carry out appropriate due diligence and to communicate any concerns with the individual who has requested the transfer.

For more information on the considerations for trustees and administrators, as well as other sources of guidance (including TPR and Action Fraud), please see our Alerts on recent PO transfer request rulings and the Pension Liberation Industry Group’s Code of Good Practice on Combating Pension Scams.