The employee in Cherry left police service and took his scheme benefits but was re-employed in substantially the same role less than a month later. His re-employment resulted in his losing his "protected pension age" which would have allowed him to receive benefits prior to age 55 without them being unauthorised payments. As a result, his past and future payments up to age 55 were unauthorised payments.
The Pensions Ombudsman upheld the employee's complaint. Although the employer had no duty to advise employees, it had a duty of care to provide the employee with information about the tax effects of re-employment on his retirement benefits, as contained in a Home Office circular which was available to the employer. Passing this on to the employee would not have amounted to giving advice.
The employer was directed to reimburse the employee for tax charges arising directly from the loss of his protected pension age.
Comment & Actions
- At first glance, this decision seems to contrast sharply with a 2014 case – Ramsey – where the Ombudsman said that the employer had no duty to warn a member that the upcoming reduction in the annual allowance might result in tax charges if he received an enhancement to his benefits. But this is a highly fact-specific decision. The re-employment was a national policy for the police force's benefit and the employer had indicated it would compensate officers for tax charges. The claimant went to the Ombudsman to establish his legal right to compensation. Having said that, there is no indication in the Ombudsman's determination that it is limited in application.
- Nor does there seem to be any reason why it could not apply to trustees too. Here the Ombudsman referred to the employer having a duty of care "as a responsible employer" to inform the member of the tax implications of re-employment. He was not asked to consider any liability on the trustees, but in Ramsey the Ombudsman referenced the Cowan v Scargill duty of trustees to act in scheme beneficiaries' best (financial) interests.
- While avoiding the obvious pitfalls of actually giving financial advice, employers and trustees do need to consider giving some information to members about the possible consequences of their decisions, even if is little more than setting out the facts and suggesting they get independent advice. This is particularly the case where what is involved is not routine.
- The Ombudsman's jurisdiction covers complaints against employers if they relate to pensions. In the light of the introduction of fees for bringing employment tribunal claims a couple of years ago, it is unsurprising that we are seeing more of these primarily employment-related disputes.