The Deputy Pensions Ombudsman has ordered Lloyds Banking Group (LBG) to compensate a former employee for financial loss and distress caused by a misrepresentation given to him prior to his employment... a case which illustrates the need for employers to carefully consider the messages that they give to employees - particularly in relation to their pension rights.


The complainant, Mr E, joined LBG on 6 January 2014 and immediately became a member of its pension scheme. He was then transferred (by way of a TUPE transfer) to Lloyds TSB on 1 April 2014 and joined the new TSB pension scheme. In May 2014, however, LBG informed Mr E by letter that as he had less than three months' service, he was only entitled to a refund of the employee contributions (less tax) that he had made under the scheme. This was different to members who had between three and 24 months service, as they were entitled to transfer their benefits under the old scheme across to the new scheme.

On 28 August 2014, Mr E wrote a letter of complaint to LBG. He said that he had been due to start work on an earlier date but had agreed to delay this to 6 January 2014 at the request of LBG, to enable another new starter to begin on the same day. This meant that he was unable to join LBG's pension scheme until 6 January 2014. Mr E argued that if LBG had notified him of the adverse effect that a delayed start would have on his entitlement to transfer his pension, he would not have agreed to change his start date. He also argued that, when accepting the job, he relied on written assurances from LBG that his pension benefit under LBG's pension scheme would be preserved following the transfer to Lloyds TSB and there would be no change to his contractual terms. In particular, Mr E highlighted an update from LBG on 4 November 2013 to all affected employees and new joiners) which said:

"Once we've transferred to the new business, we will not be able to participate in the Lloyds Banking Group pension. But, an alternative pension scheme will be provided and your pension benefit relating to previous pensionable service with Lloyds Banking Group will be preserved."

In its response to Mr E on 15 December 2014, LBG said that whilst Mr E’s contract of employment gave him a contractual right to membership of LBG's pension scheme, it had to apply the relevant scheme rules and that Mr E’s rights under the scheme were satisfied by the refund he had received. Mr E was dissatisfied with this response and referred the complaint to The Pensions Ombudsman.


The Deputy Ombudsman upheld Mr E's complaint, noting that the Head of HR at LBG had been engaged in policy discussions about the correct approach to take in relation to the employees transferring over to Lloyds TSB during the period leading up to a meeting on 11 December 2013. Those discussions included consideration of offering vested benefits or transfer options where those rights did not exist. At the meeting, the decision was then taken not to exercise that power. On that date, therefore, the statement given on 4 November 2013 - which was deemed to be a continuing representation - became untrue and LBG therefore had a duty to correct it. The statement was not corrected.

Mr E was, therefore, entitled to be put back in the position he would have been in had LBG corrected its misrepresentation. Giving the benefit of any doubt against the misrepresentor, as required by law, the Deputy Ombudsman found that:

  • Mr E would have negotiated a start date to place him in the three - 24 month group;
  • his benefits would have transferred to the alternative scheme run by Lloyds TSB; and
  • the transfer value which he took from that scheme would have been proportionately higher.

LBG was therefore ordered to pay Mr E compensation for his financial loss within the new TSB pension scheme, together with £500 for distress and inconvenience caused by LBG's failings.

Best Practice

This case demonstrates that statements made by employers to current or prospective employees are likely to constitute a 'representation' and therefore, there is a need to ensure that any such correspondence is accurate and kept to up-to-date or withdrawn if no longer correct.