Wallace v Unisys Insurance Service Ltd and Unisys Ltd

A deferred member fails to convince the Pensions Ombudsman that he should have been granted an early retirement pension on the special terms outlined to him in writing by his Employer at the time he was made redundant.


Mr Wallace (W) was a member of the Unisys defined benefit scheme. His Employer, Unisys Insurance Services Ltd was a subsidiary of Unisys Ltd, the Principal Employer of the Scheme. His Employer made him and 41 others redundant in 2006.

The letter from his Employer in April 2006 informing W of his redundancy confirmed that, if he elected to take his deferred pension before his normal retirement date, the maximum reduction that would be applied to his pension would not be more than 3% per annum. This accorded with an earlier e-mail in which all 42 members had been told that, following questions from union representatives, it had been agreed by the Principal Employer that a 3% reduction would be applied to pensions on early retirement from active or deferred status. Under the Scheme rules, different actuarial factors applied for those who took early retirement from active status and those who took early retirement from deferred status.

For active members, the reduction was 3%. For deferred members the reduction factor was decided by the trustees after taking actuarial advice and was less generous. In all cases, early retirement required the consent of the Principal Employer.

W then signed a compromise agreement with his Employer in full and final settlement of all claims relating to his employment. The only reference in it to pensions was to the fact that the agreement did not prejudice any claims in respect of accrued pension rights.

Three years’ after being made redundant, W requested early payment of his deferred pension. For cost reasons, the Principal Employer declined to give its consent to the early retirement pension using a 3% reduction factor, but agreed to early retirement using the trustees’ cost-neutral factors applicable to deferred members. W complained to the Pensions Ombudsman (PO).


When considering W’s entitlement to take his pension early, the PO took the scheme rules as her starting point. The rules clearly stated that a request for early retirement of a deferred pension was subject to Principal Employer consent. If consent was given, it was the trustees who decided the reduction factor that would be applied to the early retirement pension and not the Employer or the Principal Employer.

The PO concluded that the Principal Employer was within its rights not to give its consent to early retirement and W had no right to take his pension early or on any particular terms ie with a 3% reduction factor applied.

The PO then considered whether the statements made to W in 2006 gave him an automatic entitlement to take his pension early on the terms he said were agreed ie with a 3% reduction factor. TPAS (the Pensions Advisory Service) argued on W’s behalf that the 2006 letter amounted to a contract between W and the Employer. The PO disagreed. The 2006 letter told W he was being made redundant and contained a statement about the 3% reduction factor. As there was no offer, acceptance or consideration, there was no contract.

The PO also considered whether the principle of estoppel might apply to the representations made about the 3% reduction. If it applied, it would prevent the Principal Employer from going back on its (alleged) promise.

To succeed, a clear promise must have been made to W which was intended to be acted on. W would then have to prove that he acted in reliance on it and to his detriment. The PO found that although there had been a clear promise made, W was unable to show that he had acted on the statement as he was being made redundant anyway.

The PO decided that the statement in the 2006 letter led W to believe that his pension would be greater than in fact it was. Whilst W had not acted to his detriment, his expectations had been raised which had caused distress. As the letter did not reference the need for the Principal Employer’s consent this was maladministration. The PO found that the statement, although made by the Employer, was ”clearly made” on behalf of the Principal Employer, so the Principal Employer was ordered to pay £250 to W.


This is a curious case. At first reading, you would be forgiven for thinking that the member had been harshly done to – particularly as others who were made redundant did get to take their pensions early with a 3% reduction. Much is made in the case about the Scheme Rules and the fact that it was the Principal Employer who needed to give consent to early retirement and not Mr Wallace’s Employer. We agree with the approach that scheme rules should take precedence, however, there was clearly evidence in this case that the Principal Employer had been involved in the decision-making around the 3% reduction factor, otherwise why require that company to pay the £250? We suspect that the position might have been different had the member not signed a compromise agreement with his Employer.