Determination. Pensions Ombudsman Focus for the period December 2014 to February 2015

Transcription

1 Determination. Pensions Ombudsman Focus for the period December 2014 to February 2015

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3 Welcome to the 44th edition of the Pensions Ombudsman Focus for the period December 2014 to February Our aim is to provide you with a quarterly review of important determinations of the Pensions Ombudsman and alert you to Ombudsmanrelated issues of practical relevance. If you wish to discuss these issues and how they might affect you, please contact Mark Blyth, Partner of our specialist Pensions Litigation Group, on (+44) If you would prefer to receive this booklet in electronic format in the future, please pensionsgroup@linklaters.com

4 An administrator should have informed a policyholder s widow of the two-year deadline after which payments of death benefits would be unauthorised. Mrs Fiona Mary Bashford against Scottish Widows plc Mr Bashford had a retirement annuity contract on an individual basis with Scottish Widows plc (the Provider ). The Provider would pay out under the contract when it had received (i) written notification of Mr Bashford s death and (ii) such proof as it may require to pay the proceeds. On 19 April 2005, the Provider was informed of Mr Bashford s death. On 20 April 2005, the Provider advised his widow, Mrs Bashford, that in order to settle the funds within Mr Bashford s personal pension plan it would require his death certificate, a grant of representation, the policy schedule and a completed claim form. On 29 April 2005, Mrs Bashford sent the Provider the death certificate and claim form, but no other documents. On 6 April 2006 ( A-day ), the regime for the payment of death benefits changed. Lump sum death benefits would only be authorised payments if paid within two years of when the administrator knew, or could reasonably have known, of the member s death. If they were not authorised, lump sum death benefits would be subject to an unauthorised payments charge on the payment and incur a scheme sanction charge for the pension scheme. Transitional provisions for pipeline cases were available to protect members who had died before A-day, but these still required payments to be made within the two-year deadline. The Provider sent Mrs Bashford three reminder letters for the outstanding documents. The letters said that the Provider needed the requested items to proceed with the claim, but did not mention the time limit or the risk of a tax charge arising. The final letter was sent on 8 June Mrs Bashford sent the outstanding documents on 27 January On 2 February 2009, the Provider paid the policy proceeds of 40,218 after deducting an unauthorised payment charge and surcharge because the payment was made over two years after Mrs Bashford had initially informed the Provider of her husband s death. After correspondence with the Provider, Mrs Bashford s solicitors made a formal complaint on her behalf on 16 December 2009, arguing that the transitional provisions for pipeline cases applied. They argued that the Provider was under a duty of care to maximise the benefit under the policy. Mrs Bashford s solicitors also said that the payment should have been transferred to a separate account outside of the scheme and held on bare trust for the executors absolutely, so that no unauthorised tax payments would be applied when the proceeds were paid out. The Provider investigated the complaint and, in a letter of 18 August 2010, accepted an element of liability but wished to establish the tax position before paying compensation. Mrs Bashford instructed an accountant to help with the completion of her self-assessment tax return. Mrs Bashford s solicitors claimed that the accountant had failed to do his job properly and disappeared, causing delays as Mrs Bashford

5 instructed a second accountant. In June and July 2011 the Provider made enquiries as to how work was progressing. Only on 22 March 2012 did Mrs Bashford s solicitors communicate to the Provider the amount of tax paid. It included two 5% late payment surcharges and interest. In a letter of 6 March 2013, the Provider said that it was not possible under the rules of the policy to move the funds to an account outside of pension tax rules. The Provider explained that this would only be possible where we hold the policies under a Master Trust and we have the authority to make payments at our discretion, which was not the case for Mr Bashford s policy. The Provider also said that it would pay the majority of the final tax charge, but refused to pay the surcharges and late interest payments or interest on this amount. The Provider argued that this resulted from the problems with Mrs Bashford s accountant, not from an error by the Provider. After further correspondence, the Provider offered to pay the 400 of the solicitors fees which it judged would not have been necessary had we reacted appropriately to your correspondence, but no other fees. Mrs Bashford complained to the Ombudsman. Mrs Bashford s solicitors argued that the Provider was in a special position to know about the two-year authorised payments deadline and should have notified Mrs Bashford of it. The Provider should have considered whether the new A-day regime meant it might waive or adapt its rules, or transfer the funds to a special arrangement outside the scheme, as insurance companies were given considerable latitude by HMRC to avoid the two-year tax deadline applying. Mrs Bashford s solicitors claimed full legal costs. The Provider conceded that it could have submitted further reminder letters or notified Mrs Bashford of the A-day changes, but said that there was nothing to suggest that this would have resulted in a settlement of the benefits before the two-year deadline. The Provider lacked the authority to move the funds to a special arrangement to protect against an unauthorised tax charge as the policy was not held under a Master trust. As such, the Provider would not cover the tax charge in full, provide interest for the entire period that monies were held, or cover all associated costs. The Ombudsman determined that the transitional provisions for pipeline cases did not assist in this case as payment took almost four years. The Ombudsman s office had asked Mrs Bashford why the delay took so long and been told it was primarily caused by a delay in obtaining details of the value of her late husband s property and business interests from his accountants. The Ombudsman held that the Provider should have made Mrs Bashford aware of the tax consequences of delaying following the A-day changes. If she had been so informed, Mrs Bashford would more likely than not have chased the accountants more effectively to get the policy paid within the two-year

6 deadline. The Provider was therefore fully liable for the unauthorised payment charge of 26,812, the unauthorised payment surcharge of 10,054 and the scheme sanction charge of 10,054. However, the delays between when the unauthorised payment charge was due (31 January 2010) and when it was finally paid (January 2012) were caused by Mrs Bashford s accountant s disappearance. The Provider was therefore not liable for the late payment surcharges of 3,686 and interest of 2,178 arising from the late payment. The Provider should, however, pay interest at Mrs Bashford s bank s base rate, rather than the 8% claimed by Mrs Bashford, on the unauthorised payment tax charge for the period during which this sum was not available to Mrs Bashford, ie between 20 January 2012 and the date of payment. Mrs Bashford would not receive any additional compensation for legal fees, as the matter was relatively straightforward but the Ombudsman awarded her 200 for the distress and inconvenience she had suffered.

7 The Trustee did not have a legal duty to inform a member that it was changing the factors for calculating late retirement benefits, even when those changes reduced the benefits the member had expected. Dr Hugh Levinson against the EMI Group Pension Trustees Limited After leaving employment with EMI in 1999, Dr Levinson was a deferred member of the EMI Group Pension Fund (the Fund ) and became entitled to a pension payable from his normal pension age of 60 on 21 May Dr Levinson received a statement of his deferred entitlement from the Fund administrators on 22 May 2006, which said that he was entitled to a pension of 9,442 per annum from age 60. The statement said that if you defer drawing pension the 9,442 increases during the period of deferment. The statement also said that his pension would increase by 1/12th of 5% for each complete month of deferment, plus the lower of (i) the increase in RPI in the previous year and (ii) 5%. Dr Levinson deferred drawing his pension as he was still working. On 9 March 2011, the administrators sent Dr Levinson a summary of his benefits based on retirement from 21 May 2011, his 65th birthday, showing a pension of 14,160 per year. The second page, entitled Important Notes, contained a statement in bold saying that All of the benefits mentioned in this Statement are subject to the Trust Deed and Rules of the Fund. Both the Trust Deed and Rules of 1999 and their predecessor of 1983 said that on late retirement, the pension would be increased by such amount as the Trustee, after consulting the actuary, determined to be appropriate. In August 2012, Dr Levinson received a letter from the Fund s trustee, EMI Group Pension Trustees Limited (the Trustee ) regarding a recent funding agreement, saying that the Fund would be subject to a full buy-out within five years. In July 2013, Dr Levinson received a letter from the Trustee confirming that an agreement had been reached to secure all the benefits. On 9 October 2012, Dr Levinson received a statement showing a pension of 17,744 per year based on a retirement date of 21 October However, when he requested a further retirement statement in the summer of 2013, the administrators sent a statement for retirement from 21 October 2013 showing a pension of 15,371 per year. Dr Levinson queried why the amount had been reduced and was informed that, following actuarial advice, the Trustee had changed the factors for calculating late retirement benefits with effect from 1 April Dr Levinson brought an internal complaint and, when this was unsuccessful, appealed to the Ombudsman. Dr Levinson argued that the deferred entitlement statement of 2006 set out clearly how his pension would increase in late retirement. There were no qualifications in this statement that it was subject to the trust deed and rules, and the rules did not entitle the Trustee to backdate the calculations to age 60, overriding the earlier calculation method. The Trustee had a legal duty to disclose the change in the late retirement calculation method and in any case should not be allowed to change the method retrospectively as this was contrary to its duty of care and duty to act in the members best interests. Dr Levinson also submitted that the actuary valuing the benefits deliberately took a pessimistic, short-term view of investments, and that the Trustee deliberately withheld critical information on the effects of the 2012 funding agreement from pensioners. The Trustee denied Dr Levinson s claims.

8 The Deputy Ombudsman partially upheld the complaint. She held that under the Fund rules, the Trustee had the power to apply a late retirement increase in whatever manner it decided, subject to receiving appropriate advice from the actuary. No notice had to be given to the members and the rules did not specify that a change to the late retirement factors could only be a future change rather than applying retrospectively. A member s right to a late retirement increase is not an entitlement or an accrued right until the member actually draws his pension and the relevant late retirement benefit calculation has been performed. There is no fixed method of calculation that pension schemes must adopt to calculate late retirement increases. It is common practice to review the factors after an actuarial valuation and the Trustee did not act improperly in doing so. The Deputy Ombudsman said that there is no statutory duty to inform members of a change to the method by which a late retirement increase or late retirement factors are calculated and it is not a listed change that requires member consultation. The Deputy Ombudsman also saw no evidence that the actuary deliberately took a more pessimistic view of investments. She said that although the Trustee did have a duty of care, it must act in the best interests of all the members. It was not required to announce any changes to the late retirement factors to the Fund s members, and there was no evidence that it had deliberately withheld information from them. However, the 2006 statement was deficient as it did not say that the benefits were subject to the trust deed and rules or that the basis for calculating late retirement benefit increases could be changed. Dr Levinson therefore built up a false expectation that his benefits would increase as set out in the 2006 statement s calculation. Nevertheless, the pension figures quoted for 21 October 2012 were only applicable if he retired at that date, rather than building up an accrued right from that date, so this was a loss of expectation and not an actual loss of income. However, the Deputy Ombudsman said that it would have been distressing to have been informed that the amount he was entitled to receive was lower than expected, and awarded 500 to compensate for this distress.

9 It was maladministration that the trustee of a pension liberation scheme did not respond to any of the member s requests to transfer out. Mr X against Imperial Trustee Services Ltd Mr X was a member of the National Health Service Superannuation Scheme (Scotland) (the NHS Scheme ). In April 2012, Mr X had authorised thepensionspecialist.com (the trading name of Douglas Baillie Ltd) to obtain information about his benefits under the NHS Scheme. The administrator of the NHS Scheme (the NHS Administrator ) received an authorisation form and covering letter from The Pension Specialist LLP, which purported to be the appointed representative of Douglas Baillee Ltd. In June 2012, the NHS Administrator gave an estimate of the transfer value but did not provide the requested discharge forms because Mr X was an active member and would therefore have to opt out before transferring. Mr X opted out of the NHS Scheme and, on 5 December 2012, he signed a declaration saying that he wanted to transfer to the Capita Oak Pension Scheme (the Capita Oak Scheme ). That declaration was included in a letter received by the NHS Administrator requesting information and forms so that the transfer value could be transferred. Mr X also signed a form authorising Imperial Trustee Services Ltd ( ITSL ) to act on his behalf and to deduct a 5% fee from his member account on joining the Capita Oak Scheme, among other deductions. In February 2013, the NHS Administrator estimated the transfer value to be 367,601. The NHS Administrator also provided forms, including a declaration that Mr X had been made aware of the implications of transferring to a UK non contracted out Defined Contribution Scheme, and a factsheet on pensions liberation. Once the signed forms were returned, the NHS Administrator made the transfer payment. ITSL deducted 18,380 from Mr X s benefits as the 5% initial charge when he transferred to the Capita Oak Scheme. ITSL informed Mr X that his funds in the Capita Oak Scheme would be invested in a storage company in the north of England called Store First Limited, which offered a return of 8 to 12%. Mr X also received 17,500 as a non-repayable loan. On 29 July 2013, Mr X wrote to ITSL saying that he wanted to transfer out of the Capita Oak Scheme but he did not yet know where he would transfer to, so he would be appointing a financial adviser to help him decide. Since then he received no response to any of his letters and telephone calls to ITSL so he complained to the Ombudsman. ITSL did not respond directly to the Ombudsman s office when invited to respond to Mr X s allegations. Towards the end of the investigation, a firm of chartered accountants contacted the Ombudsman to say that it had been appointed to investigate the financial affairs of the Capita Oak Scheme and that Mr X could not transfer at that time because 9.8 million had been invested in Store First Limited.

10 The Ombudsman noted that it was against Mr X s best interests to have transferred from a secure and generous public sector scheme, which he did because he thought he would receive high returns on investments and a cash sum. The Ombudsman also said that Mr X was right to be concerned that the assets he transferred were not secure. It was not possible for the Ombudsman to determine whether Mr X had a right under the rules of the Capita Oak Scheme to transfer out because neither Mr X nor the Ombudsman s investigators had ever seen the governing documents. However, members of an occupational pension scheme have a statutory right to take the cash equivalent transfer value ( CETV ) of any accrued benefits under the transferring arrangement by applying to the trustees or managers of the transferring arrangement. The member s requirements must be met within a statutory timeframe, in Mr X s case within six months of making the application. The information provided by the Capita Oak Scheme referred to Mr X as a member of an occupational defined contribution scheme, therefore the Ombudsman held that Mr X must be a member of an occupational pension scheme. Mr X had also written to the trustees asking for a CETV. However, Mr X s application did not require ITSL to use the CETV to acquire credits in an occupational or personal pension scheme, therefore he was not eligible to have his request met within six months. However, the lack of response to Mr X s request was maladministration and, but for that maladministration, the Ombudsman believed that Mr X would have made a full application. Any undue delay could also constitute maladministration. The Ombudsman directed ITSL to provide Mr X with a CETV within 14 days of Mr X requesting a transfer to a named scheme that was prepared to accept the transfer. The CETV must be the higher of the CETV as at 30 September 2013 plus simple interest, and the correctly calculated CETV as at the payment date. The Ombudsman stressed his lack of confidence that ITSL would comply with the direction immediately and that Mr X may attempt to enforce the direction in court. The Ombudsman noted that, in any event, Mr X may find that some or all of his money is gone.

11 A member had no right to a higher rate of revaluation under an alleged oral contract. Also, the member could not require a higher rate of revaluation to be applied based on representations he made when he was a director and trustee. Mr David Pusinelli against Close Brothers Group Plc, Trustees of the Close Brothers Limited (1979) Pension Plan (the Trustees ) Mr Pusinelli became a member of the Close Brothers Limited (1979) Pension Plan (the Plan ). He became a trustee in 1992 and group executive director of Close Brothers Ltd (the Employer ) in When Mr Pusinelli left employment in 2008, he received a payment in exchange for agreeing to waive all further claims he might have in connection with his employment, including any claim in relation to accrued pension entitlements. The Members Handbook in 1995 stated that deferred pensions (except any guaranteed minimum pension ( GMP )) would be increased by 5% per year between leaving employment and the pension coming into payment. In 2002, Mr Pusinelli and two other senior executives were informally approached about possible changes to their pensions. Mr Pusinelli submitted that, following some disagreement, an oral agreement was made to cap his pensionable salary but his deferred pension was guaranteed to be revalued by 5% each year. This agreement was not recorded in writing and was not reflected in the Plan rules or his new service contract. Over the course of 25 years it had become standard practice to increase deferred pensions by 5% and pensions in payment by 3%. In 2003, most members agreed to various caps on pension increases, which would have the effect of removing the guaranteed 5% increase. However, a review in 2008 showed that the Plan was not being administered in accordance with the Rules. Among other errors, a 5% revaluation had been applied to deferred pensions even though this was not provided for in the Rules, whereas only statutory revaluation (the lower of (i) the change in the consumer price index and (ii) 5% for service before 5 April 2009 and 2.5% for service after that date) should have applied. The Employer and the Trustees jointly sought Counsel s advice as to how the Plan ought to be administered. Counsel confirmed, among other things, that correct benefits should be calculated in accordance with the Rules, statutory provisions and any contractual variations. Notably, Counsel confirmed that under statute, deferred members should now receive the lower statutory rates of revaluation, rather than 5%. As such, the Trustees and the Employer agreed that any past revaluations would not be changed but revaluations from 2011 would be at the correct rate. This position was reflected in a new definitive Trust Deed and Rules dated 26 March Mr Pusinelli s complaints under the Plan s internal dispute resolution procedure were not upheld because of the agreement he had signed waiving his entitlement to claim against the Employer, so he complained to the Ombudsman. Mr Pusinelli claimed that he was entitled to a fixed revaluation of 5% for two reasons. First, he was contractually entitled to the higher rate because of the oral agreement he reached with the Employer. Second, the Trustees failure to reflect in the Plan s rules the longstanding practice of revaluing deferred pensions at 5% amounted to 25 years of maladministration and the Employer (as the administrator) could not rely on its negligent failure to amend the rules as grounds for revaluing members benefits differently in future.

12 Mr Pusinelli submitted that the 1995 Members Handbook stated that non-gmp deferred pensions would be revalued by 5%. He also asserted that people who were in office when the 5% increase was first applied ought to have been contacted because they did not regard the 5% revaluation as a mistake. Mr Pusinelli argued that the rules should be rectified to reflect these facts. In response, the Trustees acknowledged that some benefits had not been administered in accordance with the Rules but argued that this did not confer any particular rights. The Trustees agreed with Counsel s view that statutory revaluation ought to apply because the Rules were silent on the matter. The Trustees asserted that Mr Pusinelli had failed to provide convincing evidence that the rules should represent the common intention of the parties to apply a fixed rate of revaluation, as would be necessary to allow rectification of the Plan documents. The Trustees noted that, in spite of having been a trustee for 20 years, this was the first time that Mr Pusinelli had said that the 5% revaluation ought to be included in the rules. Mr Pusinelli had also failed to identify a particular document that should be rectified. Instead, his argument was that an additional deed of amendment should have been put in place. The Trustees also submitted that there was no documentary evidence to show that a decision had been taken to apply an annual 5% increase nor was there any evidence to support his argument that he is contractually entitled to a 5% increase. Further, remuneration reports state that the executive directors increases had been set at a rate of 2% per year. As a director, Mr Pusinelli was jointly responsible for ensuring that these reports were correct. With respect to the maladministration claim, the Deputy Ombudsman held that the 1995 booklet could not override the rules, as was emphasised in the booklet, and that maladministration could not confer rights that were not set out in the rules. As the rules were silent on the matter, the statutory rate of revaluation should have applied and it would be hard to show that the rules were intended to be read any differently, so rectification could not be ordered. The Deputy Ombudsman did not consider that Mr Pusinelli s past benefit statements showing a revaluation of 5% were a clear promise in respect of future revaluations and in any event he had not relied on those statements to his detriment. As a director and trustee, any representations made in remuneration reports and benefit statements were in effect made by Mr Pusinelli. With respect to Mr Pusinelli s contractual claim, the agreement was only between Mr Pusinelli and the Employer, so did not prevent any claims against the Trustees. However, there was no satisfactory way to prove that there was a contract or what the terms of that contract were. The Ombudsman did not uphold the claim because the Plan was now being administered correctly and Mr Pusinelli had not suffered any loss from the past failure to do so.

13 Regulatory guidance cannot override the member s statutory transfer rights. Mr Gregory Stobie against Standard Life Assurance Limited Mr Stobie was a member of the Standard Life Self Invested Personal Pension Scheme (the SIPP ). Under the rules of the SIPP, Mr Stobie s right to transfer his cash equivalent transfer value ( CETV ) to another registered pension scheme was subject to the Administrator s agreement unless a statutory right to transfer applied. Mr Stobie wished to transfer to the Shredded Image Limited Pension Scheme (the Scheme ). The employer for the purposes of the Scheme was Shredded Image Limited ( Shredded Image ). On 24 May 2013, Standard Life Assurance Limited ( the Administrator ) received a letter requesting that the proceeds of the SIPP be transferred to the Scheme. On 7 June 2013, the Administrator wrote to Mr Stobie to inform him that there were warning signs that the Scheme was being used for pension liberation so the requested transfer would not be made. The letter also contained a warning and a leaflet about pension liberation as well as a link to the website of the Pensions Regulator. The Administrator sent a copy of the letter to the Regulator, who said that no action would be taken at that time. Mr Stobie complained to the Administrator. The Administrator s response was that the Regulator expected the Administrator not to make a transfer if there are grounds to suspect there is a possibility of a firm being involved in pension liberation. Further correspondence took place, in which the Administrator confirmed that the transfer would not take place without the Regulator s instruction to do so. Mr Stobie complained to the Ombudsman. He submitted that although he was currently trading through a different company, he wished to move his operations to Shredded Image once he had sold his existing business without his former business partner knowing about his new venture. He also argued that it was not unusual for Shredded Image to be registered as his home address because he worked from home. Mr Stobie did not believe that it was any concern of the Administrator where he intended to invest the funds and submitted that an investment adviser would help him to invest the funds when the time came. The Administrator submitted that it had taken into account, among other things, that Shredded Image and the Scheme s corporate trustee were newly incorporated entities, Shredded Image s registered address was the same as Mr Stobie s residential address and there was no evidence that Shredded Image was a trading company. The Scheme was also newly registered with HMRC, there was no indication of how the money would be invested and the transfer request document was identical to requests received for other schemes run in the same way as the Scheme. The Administrator considered a statutory right to transfer to be insufficient on its own for a transfer to be granted. Rather, further due diligence was necessary so that customers were not exposed to fraudulent pension liberation and/or adverse tax consequences as well as ensuring compliance with guidance from the Regulator, HMRC and the FCA.

14 The Ombudsman held that the Scheme did meet the requirements to be considered an occupational pension scheme for the purposes of statutory transfer requirements. However, Mr Stobie had conceded that he had not yet received remuneration or profit from the Scheme s employer, therefore did not have a statutory right to transfer to the Scheme. In any event, Mr Stobie could not be deprived of his statutory right to transfer by guidance issued by regulatory bodies. The Administrator had gone beyond the Regulator s guidance, which said that steps should be taken to establish the legitimacy of a scheme if a transfer request was delayed and also emphasised the Administrator s duty to carry out a transfer request where legislative requirements are met. Notwithstanding that there was no statutory right, it was for the Administrator to prove that the transfer would not have been authorised, rather than with Mr Stobie to prove that it was authorised. The Ombudsman upheld Mr Stobie s complaint to the extent that the Administrator had not properly considered its statutory and regulatory obligations before considering whether to make the transfer under the SIPP rules. The Administrator had also not taken all of the steps suggested by the Regulator, including offering the support of the Pensions Advisory Service and giving appropriate warnings. The Ombudsman directed the Administrator to consider agreeing to pay a CETV if Mr Stobie made such a request within 56 days of the determination. The CETV must be the higher of (i) the CETV as at 24 August 2013 with simple interest or (ii) the present CETV. However, the Ombudsman also noted that the Administrator was correct to identify that there were grounds for suspicion because the Scheme fitted perfectly the model of unorthodox arrangements that the Pensions Regulator was worried about. He also added a serious note of caution that Mr Stobie was intending to take a high risk step and that he may wish to consider taking professional advice before taking that step.

15 A member does not have the right to transfer out if the receiving scheme is not an occupational pension scheme for the purposes of statutory transfers. Mrs Diane Kenyon against Zurich Assurance Ltd Mrs Kenyon requested to transfer from the Zurich Personal Pension (no 1 A) Plan (the Plan ). Under the Rules of the Plan, Mrs Kenyon s right to transfer was subject to the consent of Zurich Assurance Ltd ( Zurich ), the Plan s administrator, unless a statutory right to transfer applied. Mrs Kenyon requested to transfer into the Axiom Umbrella Pension Trust (the Axiom UPT ), established by a company based in Belize but governed by the laws of England. The trustee of the Plan was also based in Belize but the administrator was an English company called Business Law Ltd ( Business Law ). Mrs Kenyon rang Zurich on 25 October 2012 to request a discharge form. During the call she was advised that her financial adviser might not have authorisation and might not have full details of her policy. On 13 November 2012, Business Law wrote to Zurich saying that Mrs Kenyon had applied to join Axiom UPT and included a signed scheme membership letter and a transfer value request. Although no current information about Business Law or Axiom UPT was available on the internet, Zurich had found a brochure which stated that participants in Axiom UPT would be charged fees of at least 15% in addition to an agreed sum to an introducer and an additional charge of 1,000. Zurich cited this brochure in its response and asked her to confirm whether she had been offered a cash incentive to transfer. Mrs Kenyon twice confirmed in writing that she had not received a cash incentive and would like to proceed with the transfer. Zurich wrote to Mrs Kenyon on 31 December 2012 stating that it could not satisfy itself that the transfer would be a recognised transfer under the Finance Act 2004 but it would continue to consider her request. Following further correspondence with Zurich, in which Zurich restated its concerns in relation to the Finance Act 2004, Mrs Kenyon complained to the Ombudsman. Mrs Kenyon then ceased to actively engage with the Ombudsman s office but her complaint was determined in the public interest. Mrs Kenyon had claimed to be aware that some companies do not adhere to pension rules but that Axiom UPT was not one of them. She had also provided documents to show that she had already transferred three pensions to Axiom UPT without any problems and that her husband had also transferred his pension to Axiom UPT. Zurich submitted that the Plan s rules did not permit them to make an unauthorised payment. Mrs Kenyon was aged 43, so Zurich were concerned that she was requesting the transfer to access cash. Other factors taken into consideration were that during the telephone call on 25 February 2012, she had been unclear about the financial advice she had received and she had claimed the transfer was for her new work pension plan, which the Axiom UPT was not. Further, Business Law had never been registered with the FCA, and Axiom UPT s website suggests that pensions could be accessed at any age and asked Do you want a scheme that is not constrained by UK Pension Law?.

16 Zurich also highlighted negative press reports about Axiom UPT and reported that HMRC had flagged Axiom UPT as a scheme in which it required to know all transfer requests received. The Ombudsman held that the rules of the Plan did not grant Mrs Kenyon an unconditional right to transfer. Axiom UPT s governing documents did not specifically set out who met the criterion of being a person with service in employments of a description because the wording was so vague that any form of employment with any employer would be included. As such, Axiom UPT was not an occupational pension scheme for the purposes of statutory transfers. It was also improbable that Mrs Kenyon ever received remuneration from any employer connected to Axiom UPT, therefore her application did not require Zurich to use the CETV to secure transfer credits under the rules of Axiom UPT. Additionally, the rules of Axiom UPT did not give the trustees power to pay benefits to members, so a transfer would probably not have secured a right to benefit under Axiom UPT. Further, this would not have been a recognised transfer because a significant proportion would likely have been used for a purpose inconsistent with being a recognised transfer, specifically the various large transfer fees. However, it should have been Zurich s responsibility to establish that Mrs Kenyon did not have the right to transfer to Axiom UPT. It was not Mrs Kenyon s responsibility to prove that she did have the right to do so.

17 A member must be given the opportunity to consent to sharing their medical records before a final decision is reached. Also, the early pension on compassionate grounds in this case was a discretionary benefit that did not have to be awarded. Ms Lynne Thomson against Wakefield Council and West Yorkshire Pension Fund Ms Thomson was employed by Wakefield Council (the Council ) from December 1975 until August 2005, when her employment was terminated due to depression and anxiety. Her pension benefits with the Local Government Pension Scheme ( LGPS ) were deferred and she was awarded incapacity benefits by the Department for Work and Pensions ( DWP ). In 2007, the DWP awarded Ms Thomson Disability Living Allowance ( DLA ). In 2008, the Council told Ms Thomson that she could take her pension early on compassionate grounds or, alternatively, she could take an ill-health pension. Ms Thomson applied to take her pension from age 50 on compassionate grounds. In June 2009, the Council wrote to Ms Thomson to inform her that it could not release the pension on compassionate grounds for reasons of cost. Ms Thomson was told that she could apply for an ill-health pension instead. On 14 September 2010, Ms Thomson applied for her LGPS benefits to be released early on compassionate and ill-health grounds. She cited, among other reasons, that the DWP had assessed her as eligible for DLA until 2015 and that her employment was terminated on the grounds of ill-health that had been caused by her employment. Ms Thomson argued that, but for the Council causing her to become ill, she would have continued to work. Ms Thomson also suggested that her symptoms may be reduced by having the pension released. On 29 September 2010, an Occupational Health Physician ( OHP ) said that Ms Thomson s consultant psychiatrist had said that Ms Thomson had not had any psychological or supported services to date and that it was possible her condition may improve substantially with adequate input. The OHP concluded that Ms Thomson was not permanently incapable of performing her former job and the Council rejected her application on ill-health grounds. The Council also informed Ms Thomson that the LGPS rules had changed on 1 April 2010, so she would need to have reached age 55 to apply for her benefits to be released early on compassionate grounds. Ms Thomson appealed the decision through the internal dispute resolution procedure ( IDRP ). At the first stage, the Council held that her medical evidence (being the same as the supporting evidence provided to the DWP) had not persuaded the OHP that she was permanently incapacitated. As Ms Thomson had not been given appeal rights when she made her initial application in 2008, the Council allowed her to appeal. That appeal was rejected. In September 2011, the second stage of the IDRP was heard by the City of Bradford Metropolitan District Council ( CBMDC ), which upheld the decision to reject the application for compassionate pension release. CBMDC held that the Council had made the decision in line with its policy on cost. CBMDC also held that the OHP could

18 not certify the permanency of Ms Thomson s condition because she had not supplied medical evidence other than that used for her DLA application. However, CBMDC granted Ms Thomson the right to submit a further application on medical grounds alongside supporting medical evidence. In November 2011, Ms Thomson complained to the Ombudsman. She claimed that her application on compassionate grounds had been incorrectly rejected, that the Council had taken too long to make its decision and that the reasons given did not acknowledge either her lengthy employment service or the fact that her employment had caused her illness. In January 2013, Ms Thomson and the Council agreed to a resolution proposed by the Ombudsman. Among other things, the Council was to ask an OHP with no previous involvement to give a fresh opinion on Ms Thomson s eligibility on ill-health grounds and Ms Thomson was allowed to submit further medical evidence to support her application. Subsequently, the Council paid Ms Thomson 200 compensation and two different OHPs reviewed her case. Both concluded that there was insufficient evidence to say that her condition was permanent. The panel considered the new medical evidence and further evidence but concluded that Ms Thomson had not met the criteria in terms of the level of care that she required and that her employer could not afford to meet the cost of the early payment. Ms Thomson appealed via the IDRP again, claiming that the OHPs were not aware of her medical condition when they made their decisions because the Council had sought consent to release her occupational health records but not her medical records. She also said that she should have been allowed to attend an occupational health unit assessment and the panel meeting. The Council held that it had followed the resolution proposed by the Ombudsman. The case was referred back to the Ombudsman. Ms Thomson claimed that the Council had not considered all the relevant information, nor had she been given the opportunity to send medical evidence after the 2013 resolution. She argued that the Council did not give the panel all the information she had submitted but instead had given summaries which did not accurately reflect her application and evidence. The Council argued that Ms Thomson had been given sufficient opportunities to consent or provide medical evidence. During the initial applications, Ms Thomson declined to supply evidence when requested and she did not consent to the release of her medical records when she was referred to the occupational health unit before her employment ceased. In relation to the application on ill-health grounds, the Deputy Ombudsman held that after the 2013 resolution was agreed, the Council did not ask Ms Thomson whether she would consent to her medical records being reviewed. The Deputy Ombudsman noted that Ms Thomson had previously been evasive about whether she would share her records and stressed that the DWP application forms were not sufficient evidence for LGPS purposes.

19 The Deputy Ombudsman directed the Council to contact Ms Thomson within 28 days to allow her one further opportunity to consent to sharing her medical records. Ms Thomson was directed to respond within 21 days of being contacted. If Ms Thomson did not consent, the Council s decisions reached after the 2013 resolution would stand. If Ms Thomson did consent, the Council must ask an independent OHP with no prior involvement to review the case. If the medical records cover 2005 or before, a further opinion from a different OHP must be sought as to the likelihood that Ms Thomson was permanently incapacitated in 2005 when she ceased employment. The Deputy Ombudsman stressed that the Council must assess the opinions and ask the right questions before reaching its own decision. The Deputy Ombudsman did not uphold Ms Thomson s claim in relation to the application on compassionate grounds. Compassionate benefits were discretionary and the Council had considered the application in line with its policy and given a detailed explanation for its decision. The Deputy Ombudsman declined to award compensation because Ms Thomson had not been as helpful as she could have been in ensuring that the Council had all the information needed to determine her case.

20 Regulations did not prohibit removing a member s right to an unreduced redundancy pension because the amendment was not directly related to the member s transfer of employment. The member s eligibility for the pension should be assessed as at the date when the amendment took effect. Mr Michael Heyes against ABB Ltd and the Trustees of the ABB Pension Plan Mr Heyes elected to join the Former ICI Fund Section (the FIFS ) of the ABB Plan (the Plan ). FIFS was established in 2001 for employees who transferred when ABB Ltd ( ABB ) purchased Eutech Engineering Solutions Limited ( Eutech ) from ICI. Under the 2001 acquisition agreement between ABB and ICI (the Acquisition Agreement ) it had been agreed that there would be no amendments to the FIFS for the first four years following the completion of the acquisition. A supplemental deed dated 20 June 2002 incorporated into the FIFS certain redundancy provisions ( Benefit 4 ) which already existed in the rules of the ICI Pension Fund Through a deed of amendment which took effect from 1 August 2005 (the 2005 Deed of Amendment ), ABB amended the FIFS so that only members who both were over the age of 50 and had accrued 10 years of pensionable service as at the amendment date would retain Benefit 4. At that date Mr Heyes had attained age 45, so ABB and the trustees of the Plan (together, the Respondents ) refused to award Benefit 4 to Mr Heyes when he was made redundant in December Mr Heyes complained to the Ombudsman. Mr Heyes argued that removing Benefit 4 from him was contrary to section 67 of the Pensions Act 1995 ( Section 67 ), which says that a scheme cannot be altered in a manner which would, or might affect any entitlement, or accrued right of any member, because his entitlement to Benefit 4 began when he completed 10 years pensionable service in As such, Mr Heyes claimed that he should have received the benefit when he was made redundant after having reached 50 years of age. For the same reason, Mr Heyes also claimed that removing his entitlement to Benefit 4 was contrary to the amendment power under the Plan s rules. Mr Heyes cited a clause of the Acquisition Agreement under which ABB was required to provide benefits to ex-ici employees which were no less valuable than those which would have been provided by ICI s defined benefit scheme. Benefit 4 was specifically listed in that clause. Mr Heyes further argued that ABB s intention to make changes related to the transfer of employees in 2001 because ABB had planned to make changes at the end of the first four years. As such, Mr Heyes argued that the Transfer of Undertaking (Protection of Employment) Regulations 2006 ( TUPE ) should apply to his pension calculation on redundancy so that, following certain case law, his entitlement to Benefit 4 should have transferred with him to ABB. The Respondents argued that the deed amending the rules in 2005 provided that Mr Heyes must have reached age 50 by 1 August 2005, not by the date of his redundancy. The Respondents further argued that the Plan rules and the Pensions Act 1995 only prevent amendments being made to accrued rights, whereas Benefit 4 was a contingent right because it depended on a redundancy taking place.

21 The Deputy Ombudsman did not uphold Mr Heyes complaint. It was held that the 2005 Deed of Amendment had changed the rules of the Plan so that Mr Heyes must have been between the ages of 50 and 62 at the date of the amendment, not at the date of redundancy. The Deputy Ombudsman emphasised that entitlement to and the subsequent payment of Benefit 4 were dependent on both the age requirement and the number of years service being met. As such, Mr Heyes was not eligible to receive Benefit 4. For the purposes of Section 67 and the amendment power under the Plan rules, Mr Heyes accrued rights should be calculated as at 1 August At that time, Mr Heyes had not met the age requirement and therefore did not have an accrued right under Section 67 or the rules. The Deputy Ombudsman held that the Respondents had not breached the terms of the Acquisition Agreement because they were only prohibited from making benefits less generous during the first four years after the acquisition. The 2005 Deed of Amendment became effective after that four year period had ended. Although the Deputy Ombudsman agreed with Mr Heyes that TUPE did apply in his case, she held that there was no evidence to suggest that the closure of the FIFS in 2005 directly related to the transfer in 2001 and that, from a practical perspective, it would be unlikely that the FIFS would have been opened in 2001 with a view to closing it four years later.

22 The member was aware of her duty to declare that she had returned to work and was being overpaid. The claim for the overpaid sums was not barred because the statutory limitation period had not expired. Ms Victoria Barton against Teachers Pensions Ms Barton, a member of the Teachers Pension Scheme (the Scheme ) retired from teaching on 31 August 2000 at the age of 58. Before retiring, she completed an application for premature retirement benefits, which came into payment on or around her retirement date. She returned to work as a supply teacher for Norfolk County Council (the Council ) on 18 January Under the Teachers Pension Regulations 1997 (the Regulations ), Ms Barton was obliged to inform the Secretary of State that she had returned to teaching. On 17 January 2001, the Council notified Teachers Pensions that Ms Barton had undertaken temporary teaching work. Teachers Pensions wrote to Ms Barton to tell her that she must complete a certificate of re-employment if her earnings exceeded a specified amount. The Regulations require Scheme members in receipt of a pension to notify the Secretary of State if their salary subsequently changed because a member s benefits may be suspended if the combined income from their employment and pension exceeded the salary they would have received had they not retired. Between March 2002 and April 2005, Ms Barton returned to full-time teaching but did not complete the certificate of re-employment. Her earnings exceeded the threshold, which resulted in her pension being overpaid during that period. Ms Barton continued to work part-time after April In January 2009, Teachers Pensions became aware that Ms Barton might have returned to work and sent a series of letters asking her to complete the certificate of reemployment. The Ombudsman saw no evidence that she had done so. Due to the lack of response, Teachers Pensions used data from the Council to determine that Ms Barton s pension had been overpaid. On 17 January 2014, Teachers Pensions wrote to Ms Barton to inform her that she had been overpaid and subsequently sought to recover the overpayments. Before Teachers Pensions began recovering the overpayments, an agreement was reached whereby Ms Barton s repayments were reduced from approximately 350 to 147, subject to Ms Barton completing a means questionnaire. Teachers Pensions rejected the evidence Ms Barton provided with the questionnaire and wrote to her on 18 September 2014 to inform her that she must pay the higher monthly rate unless she paid a lump sum upfront. Ms Barton complained to the Ombudsman in August Teachers Pensions defended its right to recover the overpayments in a response sent to the Ombudsman on 23 November Teachers Pensions also claimed to have discovered an additional period of overpayment during the tax year 2005/06 totalling 3,401. Teachers Pensions subsequently informed Ms Barton about this in a letter dated 28 January Ms Barton submitted that Teachers Pensions should be barred from recovering the overpayments because it took nearly nine years to notify her of the overpayments between March 2002 and April She also claimed that she did not think that she needed to inform Teachers Pensions of her re-employment because the head teacher of her school