It is not uncommon for a member’s records to be lost during a scheme transfer leaving no conclusive evidence as to where the liability lies. The Ombudsman had to consider this issue in the recent case of Smith and he came to a sensible and practical conclusion which acts as a reminder of the importance of keeping accurate scheme records. The brief facts are that Mr S was a member of Scheme A. He joined Scheme B in 1991 for future service. There was a bulk transfer of past service benefits from Scheme A to Scheme B but Mr S elected not to transfer. When he came to draw his benefits, Scheme A had been completely wound up and Scheme B had no record of ever having received a transfer payment. The Ombudsman concluded that, on the balance of the evidence, Mr S’s benefits had remained in Scheme A and were now lost. The administrators of Scheme A were held responsible for the failure to keep proper records and were directed to pay Mr S a sum equivalent to the lost pension benefits.
In another recent case the Ombudsman was asked to consider the actions of the trustees and scheme administrator/actuary of a scheme winding up in deficit. The determination should give some comfort to trustees in a similar position. There is nothing ground-breaking in it – but it covers many typical events and shows the Ombudsman taking a fairly robust view of trustee obligations.
The full determination can be found here
The Scheme commenced winding up in July 2006 and Mr W was a deferred member. His transfer value on wind up was significantly lower than the pre-wind up value of his benefits. He brought a very wide ranging complaint concerning the demise of the scheme. Matters covered included actuarial valuations, investment performance, contribution demands, debt recovery and trustee conflicts. Some of the key findings are set out below.
Interesting points from the Determination
The Ombudsman's jurisdiction did not cover actuarial advice.
The Trustee is entitled to rely on the advice of the actuary, as it would be entitled to rely on the advice it receives from any professional adviser, unless there was good reason why it should not.
The contribution rule provided for “such rate as the trustee decides ...is sufficient to maintain benefits”. When the Scheme was ongoing, this only gave the Trustee the right to demand contributions to pay benefits as they fell due, not to bring the scheme up to full buy-out.
Appropriate steps were taken to manage the trustee conflicts. The chairman of trustees was also a director of the parent company. He had abstained from parent company board meetings where the pension scheme was discussed. In addition, an independent trustee had been appointed.
All the matters which were the subject of the complaint were within the range of possible actions which a reasonable body of trustees might have taken. The Trustee is required to act in the best interests of the members, it does not mean that it cannot also have some regard for the interests of the sponsoring companies too.