Welcome to the Pensions Ombudsman Focus for the period to December 2016.
In this edition, the Ombudsman confirms that the provision of an incorrect benefit statement does not entitle the member to the incorrectly quoted benefits, and that compensation is only due if the member has relied on the incorrect information to her financial detriment. The Ombudsman also considers if the correct process has been followed in determining whether an incapacity pension should be paid. In the third determination, the Ombudsman considers trustee’s duties to members when a bulk transfer is made and, in particular, whether it is sufficient to consider the interests of members generally or whether they should be considered individually.
Please do not hesitate to get in touch if you would like to discuss any of these issues and how they might affect you or indeed any contentious issues on which the Linklaters Pension Dispute Resolution Group may be able to assist.
Mrs N against the Trustees of the University of Edinburgh Staff Benefits Scheme and Hymans Robertson
Even when an incorrect pension benefit estimate was provided, this does not entitle the recipient to receive the incorrectly quoted benefits. There still needs to be reasonable reliance and a resulting financial loss.
Mrs N had both an active and a deferred membership of the University of Edinburgh Staff Benefits Scheme which was administered by Hymans Robertson (the “Administrator”). On 16 July 2015 the Administrator provided a retirement statement to Mrs N which stated that she could choose an annual pension or a reduced pension with a lump sum, and provided estimated figures. Mrs N opted for the second option. When she retired, she received a revised quotation where the lump sum had been significantly reduced. Mrs N again opted for the second option but complained through the IDRP.
Mrs N claimed that she had based her decision to retire on the amount of lump sum as stated in the first quotation and said she would not have retired if she knew the actual amount she would receive. Mrs N claimed that she was relying on the sum to pay off her mortgage and other debts.
The Trustees said that as the original statement did not reflect her actual benefits, she was not legally entitled to the incorrectly quoted benefits. They argued that as Mrs N was approaching normal retirement age, she was likely to retire in any case, and she had not provided evidence to the contrary. Mrs N had also not provided evidence that she had suffered financially. In addition the Trustees argued that as Mrs N had been provided with statements that showed the correct lump sum before 16 July 2015, she should have questioned the incorrect statement. The Trustees offered her £500 compensation for the mistake.
The Adjudicator decided that there was maladministration but providing an incorrect benefit statement does not in itself create a legal entitlement to those benefits. Further Mrs N had not shown that she relied on the incorrect statement to her financial detriment. It would have been reasonable for Mrs N to notice the difference from the previous statements and for her to query them. Mrs N had not suffered financial loss, just a loss of expectation, for which £500 is sufficient compensation.
Mrs N disagreed with the Adjudicator. She claimed that the previous statements had also been misleading, and questioned the impartiality of the Ombudsman service.
The Deputy Ombudsman agreed with the Adjudicator, recognising that there were mistakes in previous statements but the difference in amounts should have reasonably put Mrs N on notice that a mistake had been made. That Mrs N intended to use the lump sum to pay her mortgage is not a financial loss as the mortgage is a pre-existing financial liability.
The Deputy Ombudsman also firmly set out the impartiality of the Ombudsman service, stating that they do not receive inducements from pension schemes.
Mr Y against NGF Europe Limited
In relation to ill health early retirement criteria, the Ombudsman decided that it is not appropriate for occupational health advisors to make determinations on whether a member can obtain work in the future, and opinions from doctors who are experts in the illness should be given adequate weight.
Mr Y was a member of the NGF Europe Pension Fund and an employee of NGF Europe Limited (“NGF”). He previously had cancer, and although his cancer had cleared, the consequences of the chemotherapy were very severe and he requested ill health early retirement. NGF asked him to see their occupational health physician, Dr Mullet. Mr Y did so and provided Dr Mullet with reports from his own doctor. Dr Mullet, consulting with Dr Gidlow (another occupational health physician) subsequently decided that Mr Y satisfied the partial incapacity test. NGF terminated Mr Y’s employment and consented to a partial incapacity pension but rejected him for total incapacity benefits.
After retiring, Mr Y asked NGF to consider further medical reports from his doctors, including one which states that Mr Y “satisfies all of the appropriate criteria considered to have total incapacity and therefore he should be considered for total incapacity health retirement by his employers”. These were sent to and considered by Dr Mullet but her opinion was not changed and NGF refused to grant total incapacity benefits.
Mr Y complained to the Adjudicator, who found that Dr Mullet’s role as advisor and NGF’s as the decision maker was not distinguished. NGF agreed to retake the decision.
NGF received a report from Dr Gidlow who confirmed the previous position. Dr Gidlow explained that the scheme rules were restrictive and that it is difficult to believe that Mr Y would not be able to work at all for the 20 years until his normal retirement age. NGF followed the occupational health advisor’s report and justified this by saying that occupational health physicians were the experts in determining ability to work and had familiarity with the relevant tests under the scheme rules. Although Mr Y’s doctors were experts on his condition, they have no such experience and they may not have been using the correct criteria when they said that he should receive total incapacity benefits.
Mr Y complained that more weight should have been given to his own doctors’ opinions, and that his case should have been referred to a new occupational health physician and not one previously involved.
The Ombudsman stated his role was not to agree or disagree with the decision or medical opinion but to consider if the decision making process was flawed. The Ombudsman noted that, having considered the evidence, the decision maker can decide what weight to attach to certain documents or opinions.
He said that, although there was no issue with using a physician previously involved, care should be taken if relying solely on an occupational health physician to make judgements about a patient’s ability to obtain work in the future. The ability to work may be affected by factors unknown to the physician.
NGF should have asked whether Mr Y’s doctors knew the tests in the scheme rules (which it did not do) and, given their expertise, should have given some weight to the options of Mr Y’s doctors. There was also uncertainty whether NGF and Dr Gidlow had the same or correct understanding of the test in the Rules.
The Ombudsman found that there were relevant questions which NGF did not ask and that irrelevant considerations were taken into account.
Mr G against R&Quiem Financial Services Ltd and Scottish Widows
Where there is a bulk transfer on winding up, it is not the fault of the receiving trust or the advisors if the member was put on a different risk profile than he preferred as it is the trustees of the transferring trust that is giving these instructions.
Mr G was a member of his previous employer’s pension scheme and when this scheme was wound up, the trustees of the scheme (the “Trustees”) decided to bulk transfer all of the members to a s32 plan with Scottish Widows. R&Quiem Financial Services Ltd was the advisor to the Trustees (the “Advisor”).
This was communicated to all members including Mr G on 1 September 2006, and members were given one month from the date of the notice to make alternative arrangements. The letter included details of the plan with Scottish Widows. The transfer occurred on 11 January 2007.
Mr G’s benefits in his previous employer’s plan were invested with a high risk profile. However, in the Scottish Widows plan he was invested in a more balanced portfolio and funds were switched into lower risk funds as he approached retirement age. In June 2015, Mr G realised this and complained to Scottish Widows and the Advisor saying he had wanted to remain on a high risk portfolio.
Scottish Widows stated that they were merely setting up the fund as per the Trustees’ instructions. They produced a signed application form where the balanced option was selected, though this was signed by the Trustees when it should have been signed by Mr G. The Advisor explained that the Trustees chose the default fund for members that did not respond to the initial letter. The scheme rules gave the Trustees authority to do so.
The Adjudicator agreed that the Advisor was merely acting under the Trustees’ instructions. The Trustees had no duty to cater for Mr G’s particular needs. They took into account the interests of the members generally, and using the balanced portfolio was a well reasoned decision. Mr G was informed that his benefits would be invested in a lower risk fund was given the opportunity to transfer elsewhere.
Mr G disagreed and claimed the difference between his actual returns and what his fund would have been worth had it been invested in a higher risk fund.
The Ombudsman did not uphold his complaint on the basis that there was no maladministration by Scottish Widows. Decisions were made by the Trustees for which the Advisor is not responsible. The Trustees had no obligation to consider individual circumstances and Mr G could have transferred elsewhere. Mr G did not query his fund investment over many years and did not demonstrate that he wanted to remain on a higher risk plan. Although his point that the Trustees should not have signed for him was valid, this alone was not enough to uphold his complaint.