Mr D Wilson V Oxfordshire County Council (82081/1)
Mr Wilson (DW) was employed as a waste services manager for Vale District Council (Vale) and was a member of the Local Government Pension Scheme. In 2008, Vale and South Oxfordshire District Council (SOCD) decided to merge their two separate waste service teams into one, under a single manager. A second position would be created for an interim manager to deal with transitional arrangements, with that manager made redundant in December 2010. Applications for both posts were ring-fenced between DW and his counterpart at SOCD.
DW asked Vale for details of the potential pension benefits he would have if he were appointed to the interim manager position and then made redundant at the end of 2010. Vale requested the information in December 2008 from Oxfordshire County Council (OCC), the managers of the Scheme. The information asked OCC to assume the last day of DW’s service was 31 December 2010 and explained that the reason for the request was redundancy.
Under the pension regulations governing the Scheme, until 31 March 2010 a member who was made redundant aged 50+ would receive an unreduced early retirement pension. From 1 April 2010, a member had to be age 55+ to qualify.
OCC provided figures to Vale showing a pension of approximately £18K a year and a retirement lump sum of around £46K for redundancy on 31 December 2010. The cost to Vale of providing the redundancy pension was estimated at £120K. However, all these figures were incorrect. They failed to recognise that due to the impending change to the pension regulations, DW was not entitled to an unreduced pension on redundancy, as he would only be 51 at the end of 2010.
Based on the information provided, DW applied for, and accepted, the interim manager’s position and his counterpart filled the permanent role without competition. Then, in February 2010, the error came to light. OCC and Vale discussed - but rejected - an idea to declare DW redundant as at 31 March 2010, as the post was not in fact redundant until December. Subsequently, DW was made redundant on 31 December 2010 and received a redundancy payment of £21K. He actively started looking for work, as his pension could not be paid unreduced until he reached 65.
The Pensions Ombudsman concluded that it was foreseeable that DW, as the recipient of the forecast for the redundancy figures, might make a significant decision based upon them. OCC was responsible for providing figures that were ‘simply wrong and inapplicable’. The Ombudsman was satisfied that, had DW been informed of the true position about the changes to the pension regulations, DW would have applied for the permanent position.
OCC sought to blame Vale for not spotting the error. OCC argued that the change to the pension regulations had been widely communicated to all employers as it impacted on their retirement practices. Vale should have realised that it would prevent DW from taking his pension at 51. OCC argued that to put DW back in the position he would have been in, should require Vale to meet the first £120K of any cost. Although the Ombudsman accepted that Vale could have spotted the error, he did not find that Vale should have done so. However he concluded that had DW not been misled, he would have applied for the permanent position and either obtained it or not, in which case he would have left service without an immediate pension, so at no extra pension cost to Vale.
The Ombudsman decided that DW had suffered loss, being the lost opportunity to apply for the permanent position, for which he had had a 50/50 chance of success. So, DW’s loss was one half of his pay (i.e. 50% of £45K) from the date of redundancy to age 65, capped by reference to the incorrect pension figures quoted by OCC, but adjusted to take account of the redundancy payment. When the redundancy payment was taken into account, the Ombudsman concluded that the loss of earnings and value of the redundancy package were similar.
OCC was ordered to pay direct to DW equivalent sums to those that would have been paid as pension from the Scheme between 1 January 2011 and 9 May 2024 had DW left service entitled to an unreduced redundancy pension. All future increases to that pension, benefits on death and reductions should DW obtain relevant employment, should be calculated as if DW were receiving the pension from the Scheme.
This is an unusual – and costly – decision (the managers of the Scheme estimated the cost to be in the region of £235k). The managers who produced the incorrect figures found themselves ordered to pay the pension direct to the member, rather than through the Scheme. The rationale for this appears to have been an acknowledgement by the Ombudsman that, had the unreduced pension been paid via the Scheme, the employer might have had to pick up all or part of the cost – and the risks – associated with providing it. It will be interesting to see whether, given the size of the liability and the employer’s exoneration from contributory blame, this decision is appealed.