In a ruling on 6 November 2020, the High Court clarified how the legislation governing the FCF should be interpreted.
The Fraud Compensation Fund (FCF) is open to claims by occupational pension schemes that have suffered a loss as a result of an act of dishonesty.
We’ve received a number of claims to the FCF to compensate members of occupational pension schemes that were themselves part of a scam. Pension savers were incentivised to transfer their pension from a genuine occupational pension scheme into these scam schemes.
But the legislation governing the FCF wasn’t designed with this type of scam in mind, so it wasn’t clear if these schemes were eligible.
We wanted to give certainty to members of schemes caught in this situation. We also wanted to make sure we were acting within the law.
So we asked the court to clarify how to interpret the legislation. We used a test case which we felt also broadly represented other schemes.
The court has now confirmed that these types of claims are eligible for FCF compensation, and clarified the core principles that apply.
We’ll work with the independent trustees appointed to this scheme and other similar schemes to process the applications which were waiting for the court’s decision. This is likely to take some time, given the amount of investigative work we and the independent trustees need to do on each case.
This investigative work is likely to include:
assembling evidence to show an offence involving dishonesty has taken place and to establish that any reduction in scheme assets was a result of that dishonesty
obtaining and analysing member and financial information
actively pursuing the recovery of scheme assets, since the FCF is a last resort