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The opdu Report - Issue 22, May 2007 Advisory Service Forum Trewick (Q00806) Onus on trustees to seek out sufficient evidence to determine The Deputy Ombudsman noted that where a member satisfied the eligibility requirement under the scheme rules, they had an entitlement to an ill-health pension. However, the trustee had not asked itself whether the member was eligible for the ill-health pension, but instead whether the evidence to hand supported the member’s eligibility. It was not solely down to the member to supply the necessary information for the trustee to make its determination, and it was not appropriate for the trustee “as a matter of course” to refuse to approach the member’s specialists, or to expect the member to do so.
Puddephatt (Q00238) Lawful but “unhelpful” policy constituted maladministration The Ombudsman accepted that there was no legal obligation on the trustee, who had complied with the Disclosure Regulations, to have notified members of the change in factors. However, particularly as the member had made a previous enquiry about taking early retirement in 2003, they were still guilty of maladministration in not having informed him of the changes. ”Maladministration is a wider concept than unlawfulness and Trustee’s refusal to provide Mr Puddephatt with the means of making an informed decision about his pension provision amounts to maladministration on its part... It would not be appropriate for Mr Puddephatt to lose out because the Trustee adopted an unhelpful policy on providing quotations for deferred members".
No general duty to advise employees as to how to best protect their interests The Ombudsman confirmed that an employer is under no general legal duty to advise employees as to what action they should take to protect their interests in relation to a pension scheme. In certain circumstances, usually where the member has an opportunity to gain valuable pension rights and could not, by his own reasonable endeavours, discover that right, such a term might be implied into the contract of employment. The member took legal advice prior to the termination of his employment, and ought to have known that any application for an ill-health pension should have been made before leaving service. However, note that the Ombudsman also emphasised that while there was ”no general legal duty to advise, where information or advice is given it should be correct. The provision of incorrect information or advice will amount to maladministration.” Holmes and Coulson (P00664/00665) Failure to evidence proper exercise of discretion in death benefits case The administrator could not demonstrate that it had taken any note of the factors it took into account in reaching its decision and, indeed, could not provide any evidence as to the procedures that it claimed to have followed. The Ombudsman reiterated that ”the fact that a decision was made is not of itself evidence that a discretion was properly exercised” and found that, on the balance of evidence, ”the decision was taken without proper consideration but instead by applying what was said to be normal practice”. He set the decision aside and remitted it for reconsideration.
O’Brien (P00816) Failure to make sufficient enquiries in death benefits case The Ombudsman was scathing: ”I have no doubt that the Company did fail to take into account a relevant factor namely the existence of other potential beneficiaries… had diligent and careful enquiries been made they would have brought to light the existence of Mr O’Brien’s child”. As exercise of the discretion had been ”fatally flawed”, the decision was set aside and remitted for proper consideration.
Birtwistle (L00418) Exoneration clause protected trustee whose negligence was not ”conscious” The acts complained of took place in the late 1980s and early 1990s, when the trustees had not collected employer contributions due, had failed to keep records of disinvestment, used 20% of scheme assets to buy the employer’s premises without a valuation, and then failed to seek to recover the employer’s rent on the property. They had also failed to take actuarial, investment or legal advice in relation to any of these actions. These actions unsurprisingly amounted to negligence, but the liability of the former trustee turned on the meaning of the exoneration clause, which restricted personal trustee liability to ”breach of trust knowingly and wilfully committed”. The Ombudsman felt unable to hold, on the facts, that the trustee had been ”consciously negligent”. As such, and following case law, his acts fell short of knowing or intentional breach of trust and no direction would therefore be made against him.
Waugh (N00827) Dim view of professional trustee relying on exoneration clause The Ombudsman held that the trustee was entitled to rely on the trust’s exoneration clause, which excluded liability of any trustee save for ”wilful default”. Nevertheless, the Ombudsman observed that ”it does not seem to me to be acceptable for a trustee who is being paid for his professional services to avoid the consequences of maladministration when carrying out such work". Noting that the trustee was on the Pension Regulator’s register of independent trustees, he said that he would be drawing the facts of the determination to the attention of the Regulator in order that it could ”consider whether the trustee continued to satisfy conditions for registration”.
Kidd (P00850) Ombudsman’s general approach to misstatement cases In rejecting the complaint, the Ombudsman provided a useful paragraph on his office’s position on the misstatement of pension scheme benefits: ”Generally speaking, if booklets, announcements or statements are inconsistent with the Plan Rules this will not result in any change to a Member’s entitlement. That entitlement will depend on the Rules subject to any overriding statutory provisions. If incorrect information has been given in other documents this will not give rise to any additional benefit under the Plan although may be grounds for providing compensation or some other direction from me if the incorrect information has reasonably been relied upon to a member’s detriment.”
Corbett (Q00594) Mistaken quotation not binding on trustees Again, the Ombudsman confirmed that the provision of incorrect information does not itself give rise to an entitlement to the incorrect level of pension that was quoted in error. The Ombudsman found that although the member had taken financial advice based on the incorrect figures this did not amount to her having taken any action to her detriment. He did, however, award her £100 for ”distress and disappointment” at having to reconsider her retirement plans.
Clark (P01373) Costs in bringing a complaint to the Ombudsman Despite the fact of the trustees’ maladministration (indeed, part of their argument was described as ”a nonsense”) the Ombudsman emphasised that legal representation was not a required, or normal, feature of applications pursued through his office - the Pensions Advisory Service existed to provide appropriate advice without charge, with the Ombudsman himself able to initiate any further enquiries - and that he was therefore not persuaded that the involvement of solicitors for the applicant was ”reasonably necessary”. ”That Mr. Clark should have chosen to deliver his complaint by using a metaphorical Rolls Royce rather than by using public transport does not justify a payment for the more expensive form of transport”.
Motor Industry Pension Plan Trustees Limited (Q00514) ”Extraordinarily large” legal costs unnecessary The trustees asked for their legal fees of £11,700 to be awarded, saying that it was proper for them to have sought legal assistance in preparing the complaint, without which the contributions may not have been paid. However, again, the Ombudsman said that there was no requirement for lawyers to be involved in referring a dispute to him. The ”extraordinarily large” legal costs were therefore incurred unnecessarily, and were not recoverable.
Middle East Airlines (N00578) Principles of interpretation of scheme documents The trustees produced a copy of an (unsigned and undated) interim deed from 1978, which provided that the expression ”determined by the Appropriate Authority” meant certification by a pensions consultant or actuary, and that as such the reference to ”Appropriate Authority” in the current scheme rules should be construed as meaning the scheme actuary now required to be appointed under the Pensions Act 1995. The employer argued that it was inappropriate to rely on an old, unsigned document in construing the current rules, and that as ’Appropriate Authority’ was undefined, that part of the employer contribution rule was void for uncertainty. However, the Ombudsman reiterated that scheme rules were to be construed so as to give them reasonable and practical effect. In the absence of any other evidence as to the meaning of the rule, it was legitimate to rely on the unsigned deed and therefore reasonable for the trustees to have proposed the scheme actuary as being the ’Appropriate Authority’ for the purposes of the rule.
Partington (P00520) Provider should not profit from monies it should never have received The Ombudsman found that when the provider had made enquiries to the member’s status intended to establish eligibility, the member’s responses had been ”curt and unhelpful” and had he been more forthcoming at this stage the provider’s advice would have been different. However, the Ombudsman did not accept the provider’s submission that they paid no interest because it had been the member’s responsibility to keep them informed. The Ombudsman could see no reason why the company should profit from contributions it should not have received, and directed that the provider pay interest on the refunded ineligible contributions, calculated on a daily basis from the receipt of each ineligible contribution to the date of payment of such interest. Mark Grant
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