The Pensions Ombudsman has long granted awards for maladministration causing "distress and inconvenience". These have tended to be for a few hundred pounds where the complaint has not suffered any financial loss as a result of the maladministration. In 1998, the High Court gave guidance that such awards should not exceed £1,000 unless there were very exceptional circumstances. The High Court has now reconsidered these awards.
Baugniet v (1) Capita Employee Benefits Limited (trading as Teachers' Pensions) and (2) The Department for Education, was an appeal from a Pensions Ombudsman decision. Dr Baugniet was a teacher who was seeking to transfer a personal pension into the Teachers' Pensions Scheme and his complaint was that delays caused by the administrators meant that his transfer was delayed. This caused a significant loss as there was a temporary suspension imposed on transfers to public sector schemes in on 26 October 2011, whilst the Government Actuary's Department revised the assumptions to be used. As a result, Dr Baugniet, received a transfer credit in the Teachers' Pension Scheme of 3 years 235 days, and he claimed he would have received a transfer credit of 6 years 45 days if the transfer had completed before the temporary suspension was put in place.
The High Court found that the Ombudsman had erred by finding that as Dr Baugniet did not act promptly, it negated Teachers' Pensions own delays entirely. The judge sent the case back to the Ombudsman for reconsideration of whether there was negligence by Teachers' Pension causing financial loss.
However, it is the judge's comments regarding distress and inconvenience awards that may have wider significance.
First, the judge noted that the 1998 guidance not to exceed £1,000 was out of date and the limit should be rebased at £1,600 to take account of inflation since then.
Second, the judge went on to consider the circumstances of this particular case. The judge noted that on three occasions Teachers' Pensions had calculated the transfer incorrectly. There had been a lack of candour in the explanations given to Dr Baugniet and that the internal disputes resolution procedure "lacked any semblance of objective review and amounted to dogged maintenance of [Teachers' Pensions] original position." The judge commented that "it would be troubling if [Teachers' Pensions] conduct in relation to the administration of [Dr Baugniet's] transfer in, taken as a whole, was anything less than very exceptional."
Clyde & Co comment
The £1,000 limit was clearly out of date - and Ombudsman awards have tended to creep up in recent years, with more awards of around £500-£750, whereas previously £100-£250 might have been awarded for distress and inconvenience.
However, it is the comments regarding exceptional circumstances which could have a more significant impact. Although it would be for the Ombudsman to decide whether the maladministration was exceptional, the judge all but ordered the Ombudsman to make such a finding. Trustees and administrators should take note for the handling of disputes and correspondence with complainant members.