The Pensions Act 1995 requires trustees of occupational pension schemes to have in place an internal dispute resolution procedure (IDRP) for resolving disagreements in relation to the scheme. Regulations set out further requirements with which the IDRP must comply. Prior to 6 April 2008, legislation specified that the arrangements must include a two-stage procedure and laid down strict time limits within which decisions must be given. Changes in legislation that took effect on 6 April 2008 removed the requirement for schemes to have a two-stage procedure and also relaxed a number of the timing and information requirements.  

The legislation now provides that trustees may in their IDRP:  

  • include time limits for making applications;
  • specify how complaints are to be made (i.e. what information is to be provided by the complainant); and  
  • delegate their decision-making powers to one or more of their number.  

In addition, apart from the requirement that contact details for the Pensions Ombudsman and a statement regarding his role in resolving pension disputes must be included in the written decision, the format of the decision is no longer prescribed. Instead of a requirement that the decision be made within two months, the decision must be made within a “reasonable period”. The Pensions Regulator’s Code of Practice on “Dispute resolution – reasonable periods” states that the decision making process should generally be completed within four months of the complaint being received.  

While there is no longer a requirement for a two-stage procedure, the IDRP may provide that a complaint should not be heard by the trustees until the dispute has been decided upon by someone else specified in the procedure. This effectively allows trustees to retain their two-stage procedure, which many have chosen to do. An advantage of the two-stage procedure may be that the first stage (which is often heard by the secretary to the trustees) will “wean out” the non-genuine complaints and go some way to ensuring that only those complaints with merit are brought before the trustees. Similarly, simple, straightforward complaints can be resolved at the first stage without involving the trustees, thereby often allowing the complainant to receive a decision faster than if the complaint was put to the trustees in the first instance.  

A perceived difficulty under the old regime, whereby a decision in favour of the complainant at the first stage was not obviously reviewable by the trustees, no longer applies. However, if trustees decide to retain a two-stage process, thought will still need to be given as to the authority given to the stage one decision maker, which presumably will be fairly narrow.  

The one-stage procedure has several advantages. In particular, the administrative burden of the IDRP on the scheme is reduced. Many trustees have felt that the requirement to have the facts and issues of a complaint considered and a written decision provided twice is onerous and time consuming. A one-stage procedure also ensures that trustees are aware of all formal complaints in relation to the scheme. The change to a one-stage procedure clearly also advantages the complainant who may go directly to the Pensions Ombudsman if he is not satisfied with the outcome, whereas previously this could be delayed for some months.  

To benefit from both options, trustees may wish to consider amending their two-stage IDRP to allow them to waive the requirement for the first stage of the process. For example, if the scheme secretary were to notify the trustees of a serious complaint which prima facie had merit, the trustees may choose to hear it themselves in the first instance.