The Deputy Pensions Ombudsman has upheld a member's complaint against the trustees of his pension scheme because they misinformed him in relation to his pension benefits. However, the Deputy Pensions Ombudsman was not persuaded that the member had suffered any financial loss as he had not relied on the misinformation to his detriment. It is only in exceptional circumstances that a misstatement creates an entitlement to the benefits misstated (Catchpole v Alitalia Pension Trustees  (EWHC 1809 (Ch))). In this determination, the Deputy Pensions Ombudsman did order a relatively high sum of compensation of £700 be awarded to the member in recognition of loss of expectation, inconvenience and distress caused. Such sums could be significant in circumstances where the incorrect information has been issued to a wider class of members.
In Phillips (8093312), Mr Phillips had elected to preserve his defined benefits within the defined benefit ("DB") scheme when it was closed to future accrual in 1997 rather than transfer his DB benefits into the defined contribution scheme. Prior to his election, Mr Phillips had sought clarification (on wording contained in the pension booklet) from the trustees that as a deferred member he could take his DB pension at age 60 without any reduction. The trustees confirmed this position. In 2005, Mr Phillips sought further clarification about his DB benefits being received at age 60 without any deduction. The trustees re-confirmed this position.
In 2006, Mr Phillips enquired on two occasions whether he could take 25% from both his DB benefits and his DC benefits but only take money from the DC scheme. Mercer, as administrators, stated that this would be possible and the information was confirmed by scheme lawyers, who passed their confirmation to Mr Phillips.
In 2007, Mr Phillips enquired about taking early retirement and was advised by the trustees that he "will be entitled to a reduced early annual pension of £21,562". In response, Mr Phillips invoked the internal dispute resolution procedure.
The Deputy Pensions Ombudsman's Conclusions
In short, the trustees provided incorrect answers to questions Mr Phillips raised about his entitlement to pension benefits and the giving of that information was maladministration. However, no financial loss was established in this case as the member had not relied upon the incorrect information to his detriment as he still had his pension entitlement and he had purchased his investment property before the misinformation was given. However, the Deputy Pensions Ombudsman did conclude that Mr Phillips had suffered loss of expectation, distress and inconvenience as the trustees had failed to answer questions correctly regarding his date of entitlement and the failure to do so in two occasions compounded Mr Phillips' inconvenience.
Additionally, Mercer had raised Mr Phillips' expectations as they gave the impression there was no barrier to Mr Phillips receiving the benefits requested and as such he had to correspond to establish the correct position.
Whilst the trustees' and administrator's incorrect information amounted to maladministration, no financial loss was suffered by the member as he had not relied upon the misinformation to his detriment for the reasons cited above and he was therefore only entitled to benefits in accordance with the rules of the scheme. It is only in exceptional cases that a misstatement creates a right to those misstated benefits (see our Pensions e-bulletin of 7 October 2010 in relation to the High Court's decision in Catchpole). That said, the Deputy Pensions Ombudsman did conclude that Mr Phillips had suffered loss of expectation, inconvenience and stress and ordered the trustees to pay a "relatively high sum" of £700 to Mr Phillips. This was in recognition of the fact that the trustees had failed to answer his questions correctly on two occasions compounding his inconvenience and that he had to correspond with both Mercer and the trustees to obtain the correct answers. It is worth noting that such misinformation can have significant cost implications for schemes particularly if the incorrect information has been issued to a wider class of members.