In this case, the Pensions Ombudsman (the PO) determined that a pension scheme administrator should have provided the member (M) with enough information upon which to make a proper decision as to his pension benefit options. The administrator should also have identified as unattractive the deferred pension option in comparison to a return of contributions, as the deferment option was almost worthless.

In reaching this decision, and partially upholding the member’s complaint, the PO held that M could not have calculated for himself that the deferred pension would provide only a guaranteed minimum pension (GMP) because, most unusually, his contributions were very close to the actuarial value of the GMP. However, the refund option included M’s reinstatement in the state second pension, and meant that M would receive a refund of contributions and also a state second pension almost equal to the GMP which would have applied under the deferment option.

Comment: this determination will concern administrators and trustees, as the legal requirement (under the Occupational Pension Schemes (Disclosure of Information) Regulations 2006) is for information, not advice, to be provided to early leavers about their options.

Case law has established that an employer is not under a duty to advise members in relation to their rights under a pension scheme. In University of Nottingham v Eyett [1999] on the employer’s appeal, the High Court overturned the PO’s decision and held that the University had not failed in its duty to its employee by failing to tell Eyett that he would be better off by delaying his retirement by one month.

In Scally v Southern Health and Social Services Board [1992], the House of Lords (HL) came very close to deciding that there is a duty on employers to advise in respect of pension rights and benefits. In this case, junior doctors argued that they had not been informed about their right to purchase on beneficial terms additional years’ service in the NHS pension scheme.

The HL concluded that, on the specific facts of the case, it was appropriate to imply a term into the doctors’ contracts of employment that the employer would take reasonable steps to inform them about their rights, but the court did not go as far as stating that the employer must provide advice to members about the exercise of their pension rights. However, the scope of Scally is considered to be narrow, as it involved a contract negotiated by a representative body and the individual doctors could not have been expected to be aware of the particular terms of the scheme unless they had been specifically drawn to their attention.

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