Determination. Pensions Ombudsman Focus December 2003

Transcription

1 Determination. Pensions Ombudsman Focus December 2003

2 Welcome.

3 Welcome to the second edition of Pensions Ombudsman Focus (POF) for the period September to November There have only been 58 determinations issued by the Ombudsman in this period. This low number reflects the well publicised delays occurring in the processing of cases. Since the first edition of POF, David Laverick has warned against the unreasonable degree of protection given to professional trustees and welcomed the controversial Pension Protection Fund proposed by the Government. He told a meeting of the Society of Pension Consultants that he had seen no credible alternative put forward to the proposed scheme. POF aims to provide you with a quarterly review of important determinations of the Pensions Ombudsman which are of practical relevance. To discuss any of these determinations and how they might affect you, please feel free to contact our specialist Pensions Litigation Group. Mark Blyth (Partner) on (44-20) or Philip Collins (Associate) on (44-20)

4 Distress awards - Ombudsman breaks through 1,000 ceiling Davison v Elster (UK) Pension Plan Trustees and Alexander Forbes Financial Services Ltd (M00517) This complaint resulted in a direction that a financial adviser pay the member 2,000 for distress and inconvenience. The award was made despite previous guidance from the court that fines should only exceed 1,000 in exceptional circumstances. The member was given incorrect information by his financial adviser about his benefits. The member was told he would be entitled to a lump sum of 18,203 plus a pension of 1,423 per annum. As a result, the member put down a deposit on a new house. When the member retired, he was told that he would only be entitled to a lump sum of 3,500. The Ombudsman s ruling appeared to be on grounds of distress and inconvenience as the member suffered no financial loss. The failure of the financial adviser to reply to the member s settlement offers may have influenced the Ombudsman s decision. Exceptional award for administrative errors Pollitt v UNUM Provident, Aon & the Trustee of the NABS Europe Limited Group Life Assurance Plan (M00241) A member s widow was refused death benefits to which she was entitled. Before he died, the member received three pay rises that would have resulted in a death in service benefit of 250,000, subject to medical underwriting. Following the member s death, the scheme administrator informed the Trustee it would pay the complainant a benefit of 184,000 based on the member s second pay rise. The Ombudsman found that the scheme manager, UNUM Provident, had failed to notify the administrator or the member that it required a specific application form to make the additional cover valid. The Ombudsman also noted that the administrator took three months to forward the member s salary details to the scheme manager. This amounted to maladministration. The Ombudsman directed the scheme manager to pay the complainant 66,000. The scheme manager and the administrator were also required to pay one half each of the interest on the 66,000 sum and one half each of the professional costs she had incurred.

5 Incorrect estimate - insufficient evidence Kennedy v London and Manchester (Pensions) Ltd & the Trustee of the Crouch Hogg Waterman Pensions and Life Assurance Scheme (L00722) The scheme manager and Trustee were directed to pay 1,000 in compensation for providing incorrect projections of the level of a member s benefits. The member claimed the inaccurate estimate he received resulted in him refusing a role in the firm s new management structure, which led to him receiving a lower salary. The member had been offered 500 in compensation from the scheme manager. The Ombudsman accepted maladministration had taken place but said that there was insufficient evidence to conclude that the member s career decision was directly attributable to the incorrect pension estimates he had received. Part-time and relief teaching - pension election Connolly v Teachers Pensions Scheme (M00474) A member complained that she was not informed that, for her relief and supply teaching to be pensionable, she had to make a part-time pension election. The member had worked on a full-time basis during her career, but had intermittently worked on a part-time basis and as a relief teacher. The Council said records were clearly marked to show that the member had decided not to contribute to the scheme in respect of her part-time employment. The Council added that, as a long-serving teacher, it was reasonable to expect the member to have noticed the changes in her payslips that deductions were not being made when she was working part-time or as a relief teacher. The Ombudsman concluded that the member had sufficient notice from her payslips that she had not been contributing to the scheme and from a letter that an election was necessary for her part-time and relief service to count. Accordingly, the complaint was not upheld.

6 Ombudsman goes further than the courts Holding v Royal Liver Assurance Limited (M00006) The Ombudsman made a determination in favour of a widow who complained of the failure of the employer and the Trustees to provide accurate information to her late husband (a deferred member of the Scheme). The member was told that a widow s pension would not be payable if he died before he reached 60. In reliance upon this misinformation, the member transferred his benefits from the Scheme to a personal pension plan in order to provide death benefits for his wife. The Ombudsman decided that maladministration had occurred and that the widow should be awarded a pension of equivalent annual income to that which would have been provided by the Scheme. The Ombudsman noted that the employer may well be right in its argument that, in providing redress for maladministration, he was providing a remedy for the widow which might not be available to her if she had taken legal proceedings. That, however, is because I am an Ombudsman dealing with maladministration which is a different and additional role to that played by the courts, he added by way of justification. This is also a further example of a case where the Ombudsman decided that the complainant s legal costs should be paid. This is happening more often despite the Ombudsman process having been designed to be used by members without the need to instruct lawyers.

7 Failure to request extension from Opra Banting v Trustees of the Grower Marketing Services Ltd Retirement Benefits Scheme (M00751) A member, whose employer had ceased trading, made a complaint to the Ombudsman after the Scheme refused to honour a transfer value quoted to him, despite the fact that the payment was requested within the guarantee period. The Ombudsman said that no provision existed for the Trustees to deny making the payment, so they ought either to have paid the cash equivalent or applied to Opra for an extension of time in which to pay it. He concluded that the Trustees failure to do either constituted maladministration. However, he went on to say that, had an application been made to Opra, an extension would have been granted. Such an extension would have allowed the Trustees to reduce the transfer value to zero. The Ombudsman therefore concluded that what the member regarded as his injustice was caused by a lack of assets in the Scheme, not by the maladministration. The complaint was rejected. Retirement - a detriment? Keighley v The Administrators of the Trinity Retirement Benefit Scheme (M00850) A member requested a quotation for the early payment of his deferred pension. In reliance upon quotations given on three occasions, the member left his job. Two weeks after leaving, the member was notified by the administrators that the quotations had overstated his benefits. The Ombudsman was satisfied that, despite his health problems, the member would not have retired when he did if he had been given the correct information. The Ombudsman concluded that the member relied to his detriment on the misquoted figure for the lump sum. It was reasonable, he added, to expect the administrators to have been aware that the member would be relying on the figures provided by them to plan his future income. He directed the administrators to pay the member 7,890, being the difference between the lump sum he would receive and the amount originally quoted. The member also received 300 for distress and inconvenience.

8 Overpayment - change of position defence Cook v Rhondda Cynon Taff Council (M00303) A member was overpaid a pension for approximately 10 years. The Council sought to recover the overpayment by withholding amounts from further payments of the member s pension. The Ombudsman stated that it is a settled principle of law that payments made as a result of a mistake are recoverable. However, he also stated that the law recognises the recipient may have a defence if it can be shown that he, in good faith, changed his position in reliance upon the funds. The Ombudsman concluded that the member had changed his position since the level of pension he was receiving allowed him the freedom to incur substantial expenses. These included the purchase of an aircraft, which he later crashed and left him disabled. As a result of his disability, the member had higher expenses. Consequently, the Council was unable to recover the overpayment. No reliance on incorrect transfer value Harris v Trustee of the Turriff Corporation Pension Scheme (M01114) A member complained over an incorrect transfer value quotation given by the Trustee. Based upon this quotation, the member entered into an arrangement to have an apartment constructed in Cyprus. The Ombudsman concluded that the administrator, on behalf of the Trustee, incorrectly calculated the transfer value, which was maladministration. However, he was not convinced that the member made any irrevocable decisions in reliance upon the incorrect transfer value, since it did not appear that the contract for the construction of the apartment ever became binding upon him. The Ombudsman also felt that it was not reasonable for the member to rely upon the incorrect transfer value quoted, given the large discrepancy in lump sums quoted to him. The Trustee had already offered the member 100 as compensation for distress and inconvenience, a sum which the Ombudsman regarded as adequate redress.

9 Notes.

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