Determination. Pensions Ombudsman Focus for the period September 2011 to November 2011

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1 Determination. Pensions Ombudsman Focus for the period September 2011 to November 2011

2 Welcome to the 31st edition of the Pensions Ombudsman Focus for the period September 2011 to November Our aim is to provide you with a quarterly review of important determinations of the Pensions Ombudsman and alert you to Ombudsman-related 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

3 Trustees should not pay death benefits on the basis of limited or contradictory evidence Mr P Crossan and Unipart Group Pension Scheme Mr G Crossan (the Deceased ) died on 11 September 2008 whilst employed by one of the Unipart group of companies ( Unipart ). He was a death benefit only member of the Unipart Group Pension Scheme (the Scheme ). On 16 September 2008, the company wrote to Mr P Crossan, one of the Deceased s sons, and handed the letter to him at the funeral of the Deceased. The letter enclosed an information on relatives form requesting details about the relatives and dependants of the Deceased. In October, Ms A wrote to Unipart enquiring about the death benefit and was given an information on relatives form. Ms A completed the form, describing herself as the Deceased s partner and giving details about his sons. Ms A wrote to Unipart saying that she and the Deceased had been together for 12 years and shared household expenses. She supplied a joint account statement with one transaction on it. The Deceased s manager confirmed Ms A was the Deceased s partner and that he believed the Deceased had moved into her house 18 months to two years previously. The trustee decided to pay the lump sum death benefit to Ms A. On 10 March 2009 Mr P Crossan completed the information on relatives form but was told that payment had already been made to Ms A. On 11 June 2009, Mr P Crossan complained to the trustee saying that Ms A had only lived with the Deceased for nine to ten months and enclosing confirmation from the local council that the Deceased was not on their housing records or the electoral roll. Mr P Crossan was provided with an out of date definition of Death Benefit Trusts by the trustee. Unipart tried to get into contact with Ms A but were unable to do so. The trustee made further enquiries including interviewing a number of the Deceased s colleagues. Mr P Crossan complained that the death benefit was paid to the wrong person and that the trustee s handling of his complaint was inadequate. The Ombudsman upheld the complaint. The trustee did not investigate the apparent contradiction between Ms A s assertion that she and the Deceased had been together for 12 years and Unipart s records which showed that the Deceased s address only changed a year before he died. The trustee decided that Ms A qualified under the Scheme Rules as a financial dependant but she had not claimed to be financially dependent on the Deceased and there was no evidence to support this. They should have made further enquiries to establish whether she was financially dependent on the Deceased. Mr P Crossan should have been sent a letter explaining what was required and why rather than just being handed a form. Further, the trustee should have written to him to ask for the form before reaching their decision.

4 The trustee was not bound to use the old definition of Death Benefit Trusts, as the change in definitions was to reflect HMRC tax changes. It was an unfortunate mistake which doubtless caused Mr P Crossan distress and inconvenience but he knew of the mistake before making his complaint to the Ombudsman. The trustee s payment to Ms A on the basis of the limited information was maladministration. The trustee was directed to make its decision again having regard to all the information and considering the competing claims of Ms A and Mr P Crossan and the possibility of retaining the money. The trustee took 11 months to provide a first stage IDRP decision which was too long and amounted to maladministration. The trustee was directed to pay 100 to Mr P Crossan as compensation for the maladministration.

5 In awarding a lump sum death benefit the decision maker should consider all categories of potential beneficiaries and not award the sum to the first person it identifies as qualifying Miss M Kemp as legal personal representative of Mr D Kemp and Service Personnel and Veterans Agency Mr Kemp, a Royal Marine, began a relationship with Miss R in the summer of He was deployed overseas in October 2008 and returned to the UK for two weeks at Christmas. On 17 April 2009, he returned to the UK permanently to work in an Armed Forces Careers Office. Until 7 September 2009 Mr Kemp lived with his mother, Miss Kemp, after which he and Miss R moved into a rented flat together. They opened a joint bank account to make rent payments and Mr Kemp also had an account in his sole name. On 19 September 2009, Mr Kemp and Miss R were involved in a domestic dispute resulting in injuries to both of them. Mr Kemp was charged with common assault. According to Miss Kemp, Miss R removed her belongings from the flat and moved back in with her parents saying that the relationship was over. On 21 September 2009 Mr Kemp was found dead at the flat. Service Personnel and Veterans Agency ( SPVA ) wrote to Miss Kemp and said that they would write again to inform her of any entitlement to benefits. Some time later, without Miss Kemp s knowledge, Miss R claimed entitlement to the death in service benefit. Miss Kemp discovered this when she queried a letter from SPVA advising her as Executrix that the death benefit constituted 3.88% of Mr Kemp s lifetime allowance. Miss Kemp claimed that SPVA incorrectly applied the rules of the Scheme in making a payment to Miss R as an Adult Dependant. Mr Kemp and Miss R had not had a substantial relationship as they had only lived together for 11 days, and during the year they had been together Mr Kemp had been overseas for over six months. At the time that Mr Kemp died Miss R had moved her belongings out of the flat and had advised the letting agency of her desire to terminate the tenancy agreement. Mr Kemp did not provide regular financial support to Miss R, whereas Miss Kemp was dependent on Mr Kemp as she had taken out a loan on his behalf in 2007 which he was paying back at 470 per month. The Ombudsman partially upheld the complaint. Mr Kemp had not completed a valid nomination form therefore SPVA had to make a decision on the distribution of any death benefits in accordance with the Regulations of the Scheme. When exercising a discretionary power, a decision maker must ask itself the correct questions, direct itself correctly in law, take account of all relevant but no irrelevant factors, and not reach a decision which no other decision maker in the same circumstances could reasonably come to.

6 The lump sum death benefit was payable under the Regulations to any nominated person; a person entitled to a pension as a spouse or other adult dependant; or the Estate. There was no priority order to these categories, but SPVA did not consider payment to the Estate at all. Once they had determined that Miss R qualified they awarded the sum to her. On the evidence they had it was reasonable to conclude that Miss R did qualify, but that did not mean that the money had to be paid to her. SPVA had to reach a reasoned conclusion over whether to pay it to her or the Estate. As this was a difficult case it would not have been surprising for SPVA to gather further evidence, however it was not maladministration that they did not. SPVA did not ask themselves all the right questions as they did not consider whether payment should be made to the Estate. SPVA were required to reconsider the distribution taking into account the fact that the Estate was not precluded from being the recipient of the sum merely because a surviving adult dependant existed.

7 Where a scheme is underfunded, it may be reasonable for a trustee to refuse to grant discretionary benefits to a dependant because it would adversely affect other members Miss C Brown and BESTrustees (the Trustee ) Miss Brown s brother, Mr Brown, was a member of the Singer and Friedlander Limited Pension and Assurance Scheme (the Scheme ). He became a deferred member of the Scheme in 2005, when the Scheme closed to future accrual, and he was made redundant on 30 June Mr Brown qualified to elect to take an unreduced early retirement pension and entered into a compromise agreement with the Scheme sponsoring employer, Kaupthing Singer & Friedland (in Administration) ( KSF ). A clause of the agreement stated that he was entitled to an immediate pension. Mr Brown died on 6 April The Trustee had a discretion to award a lump sum death benefit and a dependant s pension to any person financially dependent on the deceased at the time of their death. Miss Brown provided details of her dependency and the Trustees scheduled a discussion on paying her benefits for their next meeting, which was rearranged from 18 September 2008 to 10 October On 8 October 2008 KSF went into administration and the Scheme began a Pension Protection Fund ( PPF ) assessment period. At the meeting it was decided that Miss Brown would be awarded a discretionary pension, provided that all Scheme members benefits were secured in full. Miss Brown was paid a lump sum death benefit under rule 12(B) because Mr Brown had died a deferred member, he had not accepted his pension and it had never been paid. She was also issued a cheque for the value of Mr Brown s Scheme contributions and additional voluntary contributions. After PPF assessment, the Scheme was to be wound up outside the PPF. The Trustee intended to proceed on the basis of the decision made in the 10 October meeting and did not consider it appropriate to pay Miss Brown a discretionary pension as members entitled to a pension under the rules would not receive their full entitlement on winding up. Miss Brown complained that the Trustee incorrectly treated Mr Brown as a deferred member. His pension should have been paid from the date his employment ceased and the compromise agreement surely meant that the pension was to come into payment at that time. Miss Brown also complained that the Trustee meeting was wrongly rescheduled and that she would have been awarded a pension without the proviso that all members benefits should be secured in full if it had not been rescheduled.

8 The Deputy Ombudsman did not uphold the complaint. There was no maladministration in treating Mr Brown as a deferred member: his pension had not yet come into payment so the only benefit payable on his death was the lump sum death benefit under rule 12(B). Rescheduling the meeting was not maladministration as under the rules meetings could be held as and when the trustees decided, provided they were held at least once a year. There was also no maladministration in agreeing to award a discretionary pension on the proviso that all member s benefits could be met in full but the Trustee should still have regard to how discretionary payments may adversely affect Scheme members. As the Scheme was not in the PPF, it was reasonable for the Trustee to exercise its discretion and decide that it was unable to pay Miss Brown a pension. The Deputy Ombudsman did not have jurisdiction to consider Miss Brown s statement that Mr Brown s pension had not come into payment under the compromise agreement as it was not part of the complaint before her.

9 A scheme manager is responsible for ensuring the accuracy of forecasts of benefits available on redundancy, and for the foreseeable consequences of failure to do so Mr D Wilson and Oxfordshire County Council Mr Wilson was employed as a Waste Services Manager for Vale of White Horse District Council ( Vale ) from September He was a member of the Local Government Pension Scheme (the Scheme ), in which Oxfordshire County Council ( OCC ) acted as scheme manager. In 2008, Vale and South Oxfordshire District Council ( SODC ) decided to merge their two Waste Services team into one, with one permanent manager overseeing the merged teams, and an interim manager to deal with the transitional arrangements. The latter post would be made redundant on 31 December Appointment to these two managerial posts was limited to Mr Wilson and his SODC counterpart. Mr Wilson asked Vale for details of his potential pension benefits should he be appointed to the interim manager position and then made redundant on 31 December 2010 (on which date Mr Wilson would have been 51). Vale duly requested this from OCC on 15 December OCC provided Vale with figures (which Vale passed on to Mr Wilson) showing that Mr Wilson would be able to take immediate unreduced pension benefits on being made redundant on this date. This was wrong, as under the rules of the Scheme there was no entitlement to a pension on redundancy before age 55. Mr Wilson applied (and was accepted) for the position of interim manager based on these incorrect figures. As a consequence, the new permanent manager role was filled by his counterpart without any competition from Mr Wilson. The error came to light in February 2010 and so when Mr Wilson was made redundant at the end of 2010 he received only a redundancy lump sum, with unreduced pension benefits not being payable until he reached 65. Mr Wilson was actively looking for employment and claiming Jobseeker s Allowance. Mr Wilson complained that OCC incorrectly informed him of the benefits he would receive on redundancy, which led to him missing an opportunity of applying for the permanent role. The Ombudsman upheld the complaint. The provision of this type of information was the primary responsibility of OCC as scheme manager, and the information provided in this case was simply wrong. Furthermore, it was foreseeable that a person receiving a forecast of his potential redundancy figures might make a significant decision based on them, as that is usually the point of requesting them. The Ombudsman accepted that Vale, as the employer, could have spotted the error, but did not consider that Vale should have checked OCC s figures or spotted something that OCC, the experts, had missed.

10 The Ombudsman accepted that, had Mr Wilson known the true position in 2008, he would have applied for the permanent managerial position. Given that he had been in his previous role for a number of years, and there was only one other candidate, the provision of incorrect information caused Mr Wilson to lose a 50/50 chance of gaining this new role. This would be quantified as half of the loss of earnings from the time of redundancy to age 65 (including future pension accrual), capped at the level of the redundancy package he had originally opted for in 2008 on the basis of the incorrect information. Both of these figures were approximately equal, and therefore the Ombudsman directed OCC to pay Mr Wilson monthly payments equal to the immediate pension on redundancy that was available under the Scheme to over-55s, plus interest for past instalments, together with future increases in payment, contingent benefits and abatements if Mr Wilson were to obtain relevant employment, in line with Scheme rules.

11 On redundancy a member will be bound by their decision as to pension and redundancy payments Miss F Low and the Law Society Miss Low was employed by the Law Society as its General Counsel. The Law Society s 2006 staff handbook provided for four categories (other than medical grounds) of early retirement for staff aged 50 and over with five years pensionable service, which included compulsory early retirement. Most of the early retirement provisions in the staff handbook were not contained in the Scheme Rules. On 11 March 2008, the Law Society sent an to all staff which said that the early retirement pension augmentation on compulsory redundancy for employees aged 50 years and over would be removed. An announcement was also placed on the Law Society s website stating that the early retirement pension augmentation would be removed and in its place the Law Society would augment the standard early retirement terms. A table set out the reduction factors that would apply at different ages under the standard terms and the new terms. A letter was sent to Miss Low asking her to consent to the changes being made in order to receive her 2008 pay award. Miss Low signed a duplicate copy of the letter and ticked to say that she understood the terms of the pay increase. On 31 December 2009, Miss Low was made redundant at the age of 62. She was given the choice of a higher redundancy payment and basic scale benefits from the Scheme, or compulsory early retirement which would result in a lower redundancy payment and enhanced benefits. Miss Low opted for the higher redundancy payment, adding the caveat without prejudice to any rights I may have in respect of my dismissal and informed the Scheme s administrator that she wanted to retire. Miss Low claimed that the letter was unclear and she believed that it meant the existing scheme would continue for those being compulsorily retired over age 60. She claimed that insufficient information was provided about the changes and the new terms were unenforceable due to section 91 of the Pensions Act Her pension should have been calculated in accordance with the earlier edition of the staff handbook as she had not given informed consent to the changes. The Ombudsman did not uphold the complaint. He did have jurisdiction to decide the complaint as it concerned Miss Low s entitlement to benefits payable under the Scheme on termination of her service. However, under either set of terms Miss Low had a choice of a redundancy payment or compulsory early retirement pension. She chose the enhanced redundancy payment and her adding the caveat to the letter did not mean she could later revisit her choice. She was free not to sign the form and as a lawyer would have understood that if she disagreed with the terms offered she should not have assented to them.

12 The terms Miss Low wanted were not available, as the 2006 staff handbook no longer applied. The made clear that the augmentation would no longer apply and a reduction for early retirement could apply depending on the number of years before age 60 the member retired. As Miss Low was over 60 she would therefore not have a reduction for early retirement but equally would have no augmentation. The announcement was clear, the letter did not mention an augmentation as part of the new terms and the 2008 staff handbook set out the new terms. Clear and unambiguous information had been provided enabling Miss Low to give informed consent. Regardless of which terms applied, Miss Low chose not to take a pension on the compulsory early retirement basis. In consenting to the changes she was not asked to give up pension or a right to a pension, as the enhancement was not in the Scheme Rules but at the discretion of the Law Society and trustee of the Scheme.

13 Deferred member was not entitled to retirement benefits under Beckman and Martin Mr J E Hunter and Atos Origin (UK) Services Limited ( Atos Origin ) and Atos Origin Pension Trustees Limited (the Trustee ) Mr Hunter was employed by Imperial Chemical Industries ( ICI ) from 1 September 1969 and was a member of the ICI Pension Fund until 1 February 1996, when his contract of employment was transferred under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the 1981 Regulations ) to Atos Origin and he became a member of the Atos Origin Pension Fund (the Fund ). As pensions do not transfer under the 1981 Regulations, Atos Origin agreed that the Fund would provide identical benefits to the ICI Pension Fund. Mr Hunter became a Group Deferred Pensioner Member on ceasing to accrue benefits under the Fund after 31 March In August 2009, his contract of employment was transferred to Computer Sciences Corporation ( CSC ) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (together with the 1981 Regulations, TUPE ). Mr Hunter wrote to Atos Origin to object to the transfer but did not pursue this when informed that the objection would terminate his employment with Atos Origin at the date of the transfer. Mr Hunter complained that when his contract of employment transferred to Atos Origin the terms of the ICI Pension Fund continued to apply as it was a condition of sale that the Fund would have identical provisions. Neither Atos Origin nor the Trustee could alter the basis on which he was entitled to an early retirement pension. Mr Hunter also complained that when his contract of employment was transferred to CSC he left Atos Origin s employment for reasons outside his control, as he was forced to accept a transfer or be considered to have resigned and would lose both his job and his right to an immediate pension. As a result, he was entitled to an unreduced early retirement pension under rule 19 of the ICI Pension Fund. The Deputy Ombudsman did not uphold the complaint. He held that TUPE only transfers contractual terms of employment, and not retirement benefits for old age, invalidity or survivors. It was established in Beckman v Dynamco Whicheloe Macfarlane Ltd [2002] IRLR 578 and Martin v South Bank University [2002] IRLR 74 that retirement benefits to be paid on dismissal or early retirement by agreement are not old age, invalidity or survivors benefits. The right to the unreduced early pension on redundancy or termination of employment at the employer s request was a contractual right that passed on transfer and was covered by rule 8A of the Fund. There was no evidence that rule 19 of the ICI Pension Fund, where a pension was available if a member left employment for reasons outside his control, was a contractual right that passed on transfer. It also related to the rights of a contributing member and Mr Hunter had become a deferred member prior to his contract of employment transferring to CSC so he would not have fulfilled the requirements of rule 19. The Deputy Ombudsman found no contractual right in favour of Mr Hunter that prevented Atos Origin from amending the Fund rules.

14 Mr Hunter did not have a contractual right against the Trustee to the continuation of the provisions of the ICI Pension Scheme, either. The Trustee was entitled to refuse an unreduced early pension as Mr Hunter did not fall within the requirements of rule 8A: his contract with Atos Origin was transferred to CSC under TUPE, so his contract of employment was treated as having originally been made with CSC and he was not considered to have been made redundant or to have retired. The Deputy Ombudsman did not comment on the fact that Mr Hunter was unhappy about the transfer of his employment to CSC as this was a commercial matter between CSC and Atos Origins.

15 It is maladministration to wrongly inform a member that they can continue accruing benefits when they have already accrued the maximum pensionable service permitted. Miss J Foster and NHS Business Services Authority ( NHS BSA ) Miss Foster joined the NHS Pension Scheme (the Scheme ) in The Scheme Regulations provided that benefits would be calculated by reference to a maximum of 45 years pensionable service. In January 2007 she contacted Northern Lincolnshire & Goole Hospitals NHS Foundation Trust (the Trust ) to ask whether she could continue in the Scheme after the age of 65. The NHS BSA informed the Trust that Miss Foster had already accrued 46 years in the Scheme which would be restricted to the maximum of 45. There was therefore no benefit in Miss Foster making further contributions to the Scheme. The Trust informed Miss Foster of this and she requested clarification from NHS BSA over her options of taking her pension or preserving it. NHS BSA wrote to her in May 2007 to say that she could continue contributions to the Scheme which would not increase her membership but would give a higher final pay figure at retirement. They further said that she could take her pension or continue in her job. In November 2009 NHS BSA wrote to Miss Foster to say that as she had 45 years of service, her contributions should have ceased on her 65th birthday. The Trust refunded her contributions from 4 June 2007 onwards. Upon her retirement on 31 March 2010 Miss Foster received a lump sum and pension. The Trust estimated that both of these would have been increased had she remained in membership of the Scheme until her retirement as she had higher pensionable pay from 2007 to Miss Foster claimed that she had continued working full-time on the expectation of a higher salary and increased benefits from the Scheme. She had incurred additional costs during the period as she had rented a flat to be near to work and had a three hour commute in her final year of employment. If she had not been misled she would have worked part-time and had greater leisure time. Miss Foster claimed that she should be entitled to the pension that would have been paid from 2007 to Otherwise her first three years of contributions in the Scheme should be refunded rather than the last three years. The Ombudsman upheld the claim. The Regulations governing the Scheme did not permit members to accrue more than 45 years service. By telling Miss Foster that she could continue in the Scheme and would receive higher benefits as a result, NHS BSA misled her and this amounted to maladministration.

16 The level of distress and inconvenience suffered by Miss Foster was high as she had relied on the incorrect information provided by NHS BSA and had continued to work believing that her benefits would be increased. It was more likely than not that Miss Foster altered her position based on the incorrect information. In the Ombudsman s view Miss Foster only continued working full-time to secure the increase in benefits that she had been informed of. Her circumstances were relevant, as she paid higher rent to live near to work, and during her final year of employment had a three hour commute to work. It was therefore likely that she would have worked part-time other than for increased pension benefits that she believed she would receive. In relation to Miss Foster s loss of expectation, the difference in the pension she would have received had she remained a member of the Scheme until her retirement was to be considered. Miss Foster suffered significant distress and inconvenience due to the maladministration as the error was not discovered for two and a half years. There was the possibility of financial loss, as her income if she had instead been paid her pension and taken part-time work was unknown. Given the rental costs and driving costs she incurred by staying in full-time employment her income may have been greater had she not remained in full-time employment. The Ombudsman determined that the Scheme rules did not permit contributions from the first three years to be refunded rather than the last three years. Miss Foster was not entitled to the enhanced benefits that NHS BSA informed her of, but should be awarded a high level of compensation for distress and inconvenience. NHS BSA should pay 4,000 in compensation.

17 The decision to award a pension on the grounds of ill-health should be made in a reasonable and appropriate manner and not delegated to a medical expert Mr R Parry and Bridgend County Borough Council ( BCBC ) Mr Parry was employed by BCBC until 7 October 2008 when his employment was terminated for incapacity to attend for work regularly due to health reasons. Under Regulation 20(1) of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 (the 2007 Regulations ), BCBC shall agree to his retirement pension coming into payment before his normal retirement age if a member s employment is terminated due to ill-health rendering him permanently incapable of discharging efficiently the duties of his employment and he has a reduced likelihood of obtaining gainful employment before normal retirement age. An enhanced pension is payable if he is unlikely to obtain gainful employment within the next three years or before normal retirement age. Before deciding to pay an enhanced pension, a medical certificate from an independent practitioner was required, evidencing that ill-health will reduce the likelihood of obtaining gainful employment before normal retirement age. Under Regulation 31, a member can request immediate payment of retirement benefits if he left employment before he is entitled to benefits and ill-health made him permanently incapable of discharging efficiently his employment. A medical certificate evidencing that ill-health will prevent him obtaining gainful employment (in local government or otherwise) before normal retirement age, or for at least three years, was required. Mr Parry went on long-term sick leave in July 2007 with back pain and depression. His employment was terminated in October 2008 as an occupational health physician at BCBC s medical advisers, IMASS, could not say whether he would be able to return to work in a reasonable period of time but was unable to declare him permanently unfit and told BCBC that he rejected Mr Parry s application for retirement. Mr Parry appealed. The case was referred to Dr Parker at IMASS who reported that all treatments should be tried before considering ill-health retirement. Mr Parry s GP reported that his back condition had deteriorated since he first saw him in 2002, despite treatment and medication, he had suffered anxiety and depression since 1992 and therapy had not helped, he required daily medication, and he had been assessed as eligible for incapacity benefit by Job Centre Plus. Dr Fletcher at IMASS reported that Mr Parry did not meet the ill-health retirement criteria under the 2007 Regulations or the 1997 Regulations: further investigation and other treatments should be undertaken. On 19 March 2009, BCBC informed Mr Parry that he was not eligible for ill-health retirement.

18 Mr Parry appealed. He was referred to Dr Pritchard-Copley of the Community Mental Health Team who agreed that he should retire on ill-health grounds. Dr Fletcher was asked to review the case by Rhondda Cynon Taff County Borough Council ( Rhondda ), the authority responsible for the second stage of the appeal. On the basis of Dr Pritchard-Copley s evidence, Dr Fletcher confirmed Mr Parry s eligibility for ill-health retirement. He signed a medical certificate stating that Mr Parry had been permanently incapable of discharging his employment since 15 October 2009 which was likely to prevent him obtaining gainful employment (whether in local government or otherwise) for at least three years or until age 65. Rhondda decided that, on the basis of the certificate, Mr Parry did not meet the enhanced pension requirements under Regulation 20(1). Unenhanced benefits were payable under Regulation 31 from 15 October Rhondda did not consider GP reports and said that it was bound only to consider specialist reports. Mr Parry complained that his ill-health retirement pension should have been granted when his employment was terminated and enhanced benefits should have been awarded. The Deputy Ombudsman s upheld the complaint: BCBC failed to consider Mr Parry s eligibility for ill-health retirement in a reasonable and appropriate manner. It was clear in Regulation 20 that if BCBC considered him permanently incapable of discharging efficiently the duties of his employment and he had a reduced likelihood of obtaining gainful employment before age 65, it should pay a pension. The decision to terminate Mr Parry s employment was for BCBC to make, as explained in Regulation 20(5). BCBC had to obtain a medical practitioner s opinion but was not bound to follow it, nor should it delegate its responsibility to him. BCBC should have ensured they had appropriate evidence to make a decision, but did not confirm that IMASS were fully informed of their role or the assessment criteria. For example, IMASS did not have details of Mr Parry s duties or know whether the 2007 Regulations or previous Regulations should be applied. The resulting medical reports were insufficient to make a decision on. Clarification should have been sought from the medical experts before accepting and relying blindly on their advice. There was nothing in legislation to support Rhondda s statement that it was bound not to consider GPs reports and there was no reason why this decision was made. The Deputy Ombudsman remitted the decision not to terminate Mr Parry s employment under Regulation 20 in October 2008 to BCBC for review, and directed BCBC to pay Mr Parry 400 for distress and inconvenience.

19 Where an employer is to offer appropriate alternative employment to an applicant for an ill-health pension, both the employer and the trustees must ensure that the employer correctly applies the scheme rules Ms J Green and British Airways plc and the trustees of the New Airways Pension Scheme Ms Green was employed by British Airways plc ( BA ) from May The contract of employment included a clause that Ms Green would be deemed to agree to be employed at any location worldwide so determined by BA, and that her base was at Heathrow. Under the rules of the New Airways Pension Scheme (the Scheme ) (of which Ms Green was a member) in force at the relevant time, a member was entitled to an ill-health early retirement pension if his employment was terminated by a participating employer on the grounds of Medical Incapacity and the principal employer notified the trustees of this. Medical Incapacity was defined as incapacity (i) from which the individual is unable to recover for the foreseeable future, (ii) which prevents him from carrying out his normal duties even after reasonable adjustment, and (iii) which prevents him from carrying out appropriate alternative employment, where this is offered by a participating employer. Appropriate alternative employment was defined as being employment which, in the opinion of the principal company, is suitable and reasonable employment taking the member s skill and current salary level into account. Ms Green had ceased to carry out her cabin crew role on 1 January 2004 due to a medical condition. She performed ground duties in Warrington, near her home in the Wirral, from July 2004 to March 2006, when she declared herself unfit for work. She was assessed by a doctor working for BA s medical advisers (British Airways Health Services or BAHS ) during 2006, who informed BA that Ms Green would not be able to return to cabin crew duties but that she was capable of undertaking ground duties. Ms Green was offered a ground placement in Heathrow Airport in June 2007, which she rejected on the basis that she was still off sick and my condition has been exacerbated by the stress I have been put under and BA s non-acceptance of my illness. BA then wrote to Ms Green in October 2007 informing her that her employment would be terminated by 28 December In refusing Ms Green s subsequent application for an ill-health pension and her appeals under the Scheme s internal dispute resolution procedure ( IDRP ), BA contended that she was ineligible for this pension because she had refused appropriate alternative employment as required by limb (iii) in the Scheme rules. The trustees of the Scheme (the Trustees ) considered that, having received confirmation from BA that the Heathrow role constituted appropriate alternative employment, they had complied with their duty to ensure that the Scheme rules were being applied correctly, as the question of appropriate alternative employment was for BA (as the principal company), not the Trustees.

20 Ms Green complained to the Ombudsman that BA and the Trustees were wrong not to award her an ill-health pension. In particular, she pointed out that in January 2008 BA had written a note to BAHS stating that, where a case was deemed ineligible for an ill-health pension, it should be reviewed by an external occupational health specialist, which had not happened in Ms Green s case. Additionally, a BA guidance note issued in January 2008 on the relevant criteria for deciding whether appropriate alternative employment had been offered included consideration as to whether the place of work was the same or within a reasonable distance. The Deputy Ombudsman upheld Ms Green s complaint. First, the fact than an external occupational health specialist had not reviewed Ms Green s case following the decision not to grant an ill-health pension was maladministration by BA, notwithstanding that the note setting out that such external review should occur was issued after the decision concerning Ms Green s entitlement had been taken. Second, location should have been considered as a factor in determining whether appropriate alternative employment had been offered, particularly where a member suffered from reduced mobility, even before the guidance was issued stating that reasonable distance was a factor. Therefore, BA should have asked BAHS, and any external expert, to advise separately on whether Ms Green was fit for the Heathrow job, taking the significant travel involved into consideration. As there was nothing to show that this had been done here, this was maladministration by BA. Third, the person judging the stage one IDRP drew conclusions from the medical evidence that it was impossible to draw, and due to BA s delays in providing evidence during this IDRP the stage one decision had to be revised, causing distress to Ms Green. This too amounted to maladministration by BA. As regards the Trustees, their role was to ensure that BA applied the Scheme rules correctly in reaching its decision. Such duty was not fulfilled merely by asking the employer to confirm that the Heathrow role constituted appropriate alternative employment. Instead, the Trustees should have considered whether BA had properly considered whether the Heathrow role constituted suitable and reasonable alternative employment, taking all relevant factors into account, including location. The Trustees had failed to do this and were therefore guilty of maladministration. In consequence, the Deputy Ombudsman ordered BA to reconsider Ms Green s application for an ill-health pension. BA and the Trustees were each ordered to pay 200 each as compensation for the stress and inconvenience caused to Ms Green by their maladministration.

21 Failure to progress the transfer of a pension that causes unnecessary delay is maladministration Mr M Shannon and AEGON Scottish Equitable ( AEGON ) Mr Shannon was a member of his employer s pension scheme, Lothian Pension Fund ( Lothian ). He wished to transfer three pension arrangements from AEGON to Lothian, including policy (the Policy ) held by the AEGON Scottish Equitable Personal Pension Scheme. Lothian wrote to AEGON in April 2008 requesting transfer information but had received no information about the Policy by the end of June. AEGON acknowledged that there had been an administrative error and issued the transfer information on 24 June. The Policy s transfer value was 7,043. The Policy contained protected rights transferred from another pension scheme but the transfer documentation had not been completed. Lothian obtained the information for the transfer and wrote to AEGON on 20 August 2008 requesting that it contact HM Revenue & Customs ( HMRC ) to formalise the transfer and enable Lothian to provide a transfer value quotation. AEGON wrote to Mr Shannon s previous scheme on 18 September to request completion of the transfer forms but received no response. Lothian records three chasing letters sent to AEGON between October 2008 and January 2009, which AEGON says it did not receive. In September 2008, AEGON paid the transfer values of the pension arrangements other than the Policy. In March 2009, Mr Shannon contacted AEGON about the progress of the Policy transfer and was told that it had not received a response from his previous scheme. Mr Shannon discovered that his previous employer had been dissolved in 2003 and informed AEGON, who immediately sought HMRC approval. In May 2009 Lothian wrote to AEGON that Mr Shannon wanted to proceed with the transfer now HMRC had approved it. AEGON gave a transfer value of 5,663 on 22 May. The transfer value passed to Lothian by AEGON on 14 July was 5,436. Mr Shannon complained that the delay in transferring the Policy caused loss as the transfer value was less than expected and AEGON should pay the difference. It was the only transfer out of seven to Lothian that did not go ahead and Mr Shannon believed that this was due to AEGON s administrative error. It was not his responsibility to inform AEGON that his previous employer had been dissolved, especially as AEGON managed that employer s pension arrangements. An offer of 100 for the administrative error was insufficient given the number of hours spent and letters written to resolve the situation. The Ombudsman upheld the complaint as AEGON s failure to follow up enquiries was maladministration and had caused unnecessary delay. AEGON could not reasonably have failed to realise that Mr Shannon wished to transfer the Policy: the Policy number was on the form Lothian sent to AEGON, it was one of three policies that were to be transferred during the same period, Lothian s letter of 20 August requested resolution of the situation, AEGON s letter to the previous scheme stated that action needed to be taken and Lothian took extra steps to obtain information for AEGON to transfer the protected rights. Once AEGON knew that the previous employer had been dissolved, it moved quickly so there was no reason that it could not have done so before.

22 The Ombudsman did not agree that Mr Shannon should be awarded the transfer value given in June 2008 but should be awarded service credits in his pension scheme as if the transfer had taken place in October This is when the Ombudsman believed the transfer could have taken place and would put Mr Shannon in the position he would have been in had the maladministration not occurred. AEGON were directed to pay Mr Shannon 250 (including 100 previously offered and rejected) for distress and inconvenience.

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