The new Pensions Ombudsman, Anthony Arter, has been in post for only four months but he’s already had some difficult cases to investigate and has potentially made some controversial legal decisions. This is interesting as his background is a pensions lawyer. He’s also already keen to reform the office but we’ll come back to that next month.
For the more run of the mill cases, the Pensions Ombudsman seems content to uphold the strict legal position. So for example, in Tutt (PO-5804), he decided that the member’s pension entitlement had been correctly calculated, although the member hotly disputed this. However the way in which this had been approached - there were delays - had caused the member distress and inconvenience so the Pensions Ombudsman gave an award for compensation of £500. Similarly for Khatra (PO-4546), the member claimed maladministration regarding her added years resulting in her being given an incorrect estimate of her retirement benefits on which she based her decision to retire. In this case, the Pensions Ombudsman agreed that the member had received an incorrect benefits statement, but said that the member should have applied a “sense test” and realised something was wrong as the estimate was “inflated” from previous years. Again, although there were delays and obviously maladministration (additionally member contributions for added years were deducted without a valid contract), the member only received £500 award for compensation so quite a hard legal line was taken. It’s worth noting the level of awards has increased under the new Pensions Ombudsman.
However in the case of Forrest (PO-1145), the Pensions Ombudsman took a broader view of what maladministration means and what award should be granted. Here the employer failed to make a pension contribution for an individual to his pension scheme. A determination was given against the employer but the employer still failed to make the payment. So the member brought a further complaint to the Pensions Ombudsman. This time the Pensions Ombudsman made an order against the director personally of the company to pay the £42,000 due to the member’s scheme plus interest plus an award of £2,000 for distress and inconvenience. Despite the Pensions Ombudsman’s talk of piercing the corporate veil, strictly there is no power legally to do this but in this very specific case, the Pensions Ombudsman took a broad view of what was maladministration and decided this was the appropriate determination to make.
The Kenworthy case (PO-4579) is noteworthy as the latest case brought by a member against the trustees of his scheme for failing to equalise the effect of GMPs. The Pensions Ombudsman decided it was appropriate for the trustees to have taken no action on GMPs at the moment but the determination is being appealed. This may push the DWP into finally publishing their policy statement on how schemes should equalise the effect of GMPs or, of course, the employer may just decide to settle to avoid being a test case.
In Pollet (PO – 3658) the member complained that he had suffered financial loss because the trustees (where the employer was also the same entity) of his DC scheme had failed to process his transfer request within a reasonable time after receiving his valid transfer request. The Pensions Ombudsman agreed and determined that the trustees should have administered the transfer request (i.e. disinvested and paid over the transfer value) within one month of receiving the necessary information, including the completed standard discharge form, from the new provider. That said, this case does not necessarily have wider application, as like many Pension Ombudsman cases it is very fact specific. The scheme itself was a SIPP, its directors had been jailed for pension fraud. The trustees were delaying their administration of the transfer request by asking the member to complete a non- standard, wide ranging disclaimer and indemnity form in favour of the trustees. The Pensions Ombudsman decided the trustees could not require the member to sign this discharge form as a condition of the transfer. An award of £500 for distress and inconvenience was made as well as the trustees having to make good any investment loss caused to the member in the receiving scheme by the delay. However, no award was granted to cover the member’s modest professional fees (£2,500) for handling the member’s complaint on his behalf. Perhaps the better lesson to learn is that while the statutory deadline for making a transfer is six months from the date of the member’s request, trustees should promptly progress any transfer request once they have all the completed paperwork needed to do so.
In the case of Lennon (PO-406), the Pensions Ombudsman decided, very unusually, to hold a public hearing in Belfast after the old Deputy Pensions Ombudsman, Jane Irvine, had given her decision. Lennon complained that she was not advised of her option of a pension transfer when she commenced employment with her employer in 1992, and specifically she was not told there was a 12 month time limit for her to make a transfer club application and then that no discretion was exercised to allow a retrospective transfer and her application form was completed without her consent. The Deputy Pensions Ombudsman upheld these complaints, but as much depended on the facts of the case, the respondent asked for an oral hearing. This was originally refused on the basis that
“My procedures are investigative as opposed to adversarial and I have the discretion to hold an oral hearing (even if one is not requested by either party) if I think it appropriate and subject to the requirement of fairness. Although there are disputed issues involved here, I considered that I could properly determine the case on the basis of the detailed written representations and the documentation submitted by the parties. Bearing in mind the passage of time since the events in question occurred and the tendency for memories to fade and for positions to harden, I did not consider that it would assist me, in reaching my determination, to hold an oral hearing in order to hear repeated orally the evidence submitted and the submissions made. I considered that a far more reliable basis on which to reach my conclusion was on the basis of the papers alone.” This was overturned by the new Pensions Ombudsman who has held a public hearing.
Finally what is also striking is that many of the Pensions Ombudsman cases relate to public sector schemes. Does that mean that the standard of pension administration is now higher in the private sector than the public sector? Or that actually the public sector schemes are more complicated in how they are set up and administered so it is more likely that things slip through the cracks. Or just that there are thousands more members in the public sector schemes so there are statistically likely to be more complaints?
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