Option to convert sterling pension into euros not offered
Trustees of the Reuters Pension Fund and Reuters Limited1
Mr Taylor (Mr T) worked for Reuters, first in the UK and then in Brussels. He was living in Brussels when his deferred pension started to be paid in 2005. The Belgian State Pensions Office told him at the time his various state pensions (UK and Swiss) were being put into payment, that those pensions were denominated in local currencies and then paid in the euro equivalent. Mr T assumed that all foreign pensions were treated similarly and did not raise the matter with Reuters.
Mr T received his Reuters pension in euros, converted from sterling at the rate applicable when each pension instalment was due for payment. In 2007 sterling fell sharply against the euro. Mr T commiserated with a fellow Reuters’ pensioner living in Europe about the erosion of the value of their pensions, only to discover that other Reuters’ pensioners had been offered a one-off option at retirement to convert their entire pension into the currency of their domicile.
Mr T complained that he had not been offered the conversion option. He was told that the Trustees had historically allowed pensioners to switch to the currency of their country of permanent residence but that following a recent review applications were only being considered on an individual basis. After unsuccessfully taking his complaint through the Fund’s dispute procedure, Mr T complained to the Pensions Ombudsman that he had been discriminated against because he was not offered a conversion but others had been. He relied on the fact that from 2009 Reuters had modified the currency procedures for paying pensioners living overseas.
Trustees’ and Reuter’s position
The option to request payment in euros arose under the discretionary benefit rule under the Reuters Fund Rules and required the agreement of Reuters, so the trustees had no unilateral power to offer conversion. There was no practice to notify overseas members of the option because; not being a right under the Fund Rules, there was no legal requirement to do so. If a member enquired about conversion before retirement, Reuters had the discretion to pay the pension in a denomination other than sterling. Any conversion was carried out on a cost neutral basis. Consequently, it would be unfair to permit retrospective conversion of Mr T’s Pension, as this would result in selection against the Fund. As a former employee there was no fiduciary relationship between Reuters and Mr T. The fact that a discretionary power to modify the pension had been exercised in favour of some members did not of itself create a right for all members.
The Pensions Ombudsman established that there was no formal policy or consistent practice, but that when approached by a member, Reuters did agree to a conversion fixed at the rate that applied at that time. The fact that an option was available to some members and not others without any particular reason for distinguishing between them was sufficient to seriously damage the relationship between Reuters and members. The evidence of what had happened in relation to other members showed arbitrary treatment even if only through administrative inefficiency.
Did you know?
There is no statutory definition of maladministration. Neither is maladministration something the Courts consider. In debates leading to the establishment of the Parliamentary Ombudsman, Richard Crossman listed some examples of what maladministration could be. Those examples are known as the Crossman Catalogue and are as follows: “bias, neglect, inattention, delay, incompetence, ineptitude, perversity, turpitude, arbitrariness”.
The Pensions Ombudsman concluded that arbitrariness could amount to maladministration and found that the arbitrariness amounted to an irrational decision and a breach of Reuters’ obligations to Mr T. On the evidence, everyone who had asked for a conversion was allowed it. As Mr T was not considered for an offer of permanent currency conversion this amounted to maladministration, so the Pensions Ombudsman upheld the complaint against Reuters and the Trustees.
Reuters were directed to give full consideration to the request to permanently convert the pension to euros, as if it was made when the pension first went into payment. If that exercise of discretion was made in Mr T’s favour, the trustees were directed to calculate what Mr T’s pension would have been taking into account the increases that would have been awarded and to pay supplementary back instalments in euros with simple interest. If the trustees required an additional contribution from Reuters representing the cost of the revised pension, both past and future, Reuters was to pay it on request. Mr T was also awarded £250.
Although the conversion policy had been dealt with historically through the general discretionary benefits rule, as it had been frequently applied over the years (albeit not consistently) it became a discretionary practice in its own right. That being the case, it is difficult to see why some members were in the know, whilst others were not. It is this factor that makes this case so compelling and illustrates why it is crucial to ensure that even discretionary policies are coherently and consistently publicised and applied. The Ombudsman made the point that it would not have been perverse to have considered and refused the member’s application on reasonable grounds. But to have done so would have required the Reuters and the trustees to have considered it in the first place…