Ending the drip is problematic

The ombudsman held that, pursuant to section 146(6) of the Pensions Schemes Act 1993, he could not look into the fundamental issue underlying the suspension of the pension payments - whether or not Mr D had committed a criminal, negligent or fraudulent act or omission causing the company loss - as ongoing court proceedings had commenced before Mr D's complaint was made. The ombudsman went on to hold that at the date of the determination there was only an allegation that Mr D had committed such an act or omission and that for the trustees to decide that such an act or omission had occurred was to pre-empt the decision of the court. The ombudsman further held that to hold Mr D’s pension payments in escrow did amount to exercise of a lien over the payment and consequently constituted a breach of section 91 of the Pensions Act 1995. The ombudsman therefore directed the trustees to recommence Mr D’s pension payments and to pay all payments suspended since June 2006 plus interest.

The case demonstrates the restrictive scope of a suspension rule. The need to obtain a court judgment where there is a dispute means that in practice, the rule is of limited value as a means to enable the employer to recover losses caused by the member’s criminal, fraudulent or negligent acts or omissions.

Monica Ma is a partner of Simmons & Simmons