The Deputy Pensions Ombudsman has rejected a complaint regarding compulsory retirement entitlements on the grounds that the complainant was bound by her decision to take a higher redundancy lump sum and a scheme pension under the "standard early retirement terms" of the scheme rather than an "enhanced compulsory early retirement" pension. The Deputy Ombudsman ruled that she had jurisdiction in redundancy cases which concern a member's entitlement to benefits payable under an occupational pension scheme on termination of service.
Miss Low was employed by the Law Society as its General Counsel and was a member of the Law Society Pension Scheme.
Rule 3(3)(a) of the Scheme (as amended on 29 June 2006) set out the basic position in relation to early retirement. The Rule provided that a member leaving service on or after his 60th birthday but before normal retirement date was entitled to a pension with no actuarial reduction for service before 1 July 2006, but actuarially reduced for service after that date.
The 2006 edition of the staff handbook included four categories of early retirement, including "compulsory early retirement", defined as retirement "before age 65, at the Society's initiative on redundancy…" The early retirement provisions in the staff handbook were implemented on a case by case basis under Rule 12 at the discretion of the scheme trustee (with the Principal Employer's consent) by way of an augmentation to benefits.
The "compulsory early retirement" terms involved taking an unreduced pension with pensionable service enhanced by up to six and two-thirds years as well as a compensation payment. Alternatively, staff retired compulsorily could opt for a redundancy payment under the Law Society's Redundancy Scheme instead of compulsory early retirement terms.
In basic terms, Ms Low had two options open to her on redundancy:
- Option 1: a higher redundancy lump sum, with an unaugmented Scheme pension under the Law Society's Redundancy Payment Scheme; or
- Option 2: a lower redundancy lump sum, with an enhanced Scheme pension in line with the "compulsory early retirement" terms set out in the staff handbook.
In 2008, it was proposed to remove the early retirement pension augmentation on compulsory redundancy but to augment the standard early retirement terms that apply to benefits earned after 1 July 2006. Following formal consultation with staff and trade unions the proposed changes were announced on the Law Society intranet and employees were informed of the announcement by email. Miss Low was asked to agree to the changes in March 2008 in order to receive her 2008 pay award and she signed a form confirming that she agreed to and understood the changes. A new edition of the staff handbook was published in April 2008 containing the changes.
Miss Low was made redundant aged 62 on 31 December 2009 and opted for the higher redundancy payment and an unaugmented pension from the Scheme (Option 1), rather than a lower redundancy payment with augmented Scheme pension under the compulsory early retirement (Option 2), subject to the caveat "without prejudice to any rights I may have in respect of my dismissal".
Miss Low claimed that she was entitled to a pension under the compulsory early retirement provisions on the terms of the 2006, rather than 2008, staff handbook, on the grounds that she had been provided with insufficient information in 2008 and, therefore, had not given her informed consent to the changes. She claimed that she had signed the form opting for the enhanced redundancy payment as it was unrealistic to expect her to go without while she pursued her complaint.
She also claimed that the 2008 terms of the staff handbook were unenforceable by virtue of section 91 of the Pensions Act 1995. Section 91 restricts the ability to surrender an entitlement to a pension or a right to a future pension under an occupational pension scheme.
The Deputy Pensions Ombudsman ruled that it had jurisdiction over the complaint (although the Law Society submitted otherwise).
Miss Low's complaint was rejected on the grounds that she chose the enhanced redundancy payment so a compulsory retirement pension was not available to her, on either the 2006 or 2008 staff handbook terms. The caveat she added when she signed the form opting for the enhanced redundancy payment did not invalidate her choice or enable her to revisit it at a later date. A factor in the rejection of her argument that she had no choice but to sign this form was the Deputy Ombudsman's view that as a lawyer she must have understood that if she disagreed with the terms, she should not have assented to them.
The Deputy Pensions Ombudsman went on to say that compulsory retirement pension on the 2006 staff handbook terms (i.e. before the changes were made to those terms in 2008) would not have been available to her in any event as the Law Society had provided her with clear and unambiguous information about the new arrangements as part of the consultation on the changes, both before and after she consented to them in 2008.
Miss Low's claim that the 2008 terms were unenforceable by virtue of section 91 of the Pensions Act 1995 was also rejected. The Deputy Pensions Ombudsman found that the pensionable service enhancement under the 2006 terms was not a right provided for in the Scheme Rules but was granted under the provisions of Rule 12 at the discretion of the Law Society and Scheme trustees. Miss Low had therefore not been asked to give up a pension or a right to a pension but to give up a discretionary amount above what the Scheme Rules provided.
The Determination includes some interesting comments on how the Pensions Ombudsman views the extent of its jurisdiction. It provides an example of what will be considered clear and unambiguous information in relation to changes to early retirement arrangements.