The ombudsman on your shoulders

This month, we highlight two decisions that deal with administrators providing misleading information to scheme members.

The provision of misleading information to scheme members is likely to be maladministration, and will be particularly problematic when a member is found to have relied on this information to their detriment when making a decision in respect of their benefits under a scheme.

In the first case, Miss Foster joined the NHS Pension Scheme in 1960.

The NHS Pension Scheme Regulations 1995 provided that on reaching age 65, a member with 45 or more years pensionable service could not accrue further pensionable service. In January 2007, Miss Foster wrote to her employer asking whether she could carry on in the scheme after she turned 65 on 5 June 2007.

She had already accrued 46 years in the scheme.

NHS Pensions initially informed Miss Foster that there would be no benefit to her making further contributions.

However, NHS Pensions wrote to Miss Foster again on 30 May 2007 saying that if she continued to make contributions to the scheme while she worked at the NHS it would “have the benefit of giving a higher final pay figure at retirement”.

Miss Foster carried on working full time and contributing to the scheme. Miss Foster incurred the expense of renting a flat closer to work and for the last year before retiring travelling three hours to and from work.

NHS Pensions, realising its error, wrote to Miss Foster in November 2009 informing her that her contributions should have stopped on her 65th birthday. It eventually refunded Miss Foster’s contributions made after 4 June 2007.

Miss Foster retired on 31 March 2010 and complained that, based on the incorrect information, she had decided to carry on working full-time past age 65 in the false expectation of increased benefits.

The deputy pensions ombudsman held that the provision of misleading information to Miss Foster by NHS Pensions was maladministration.

The ombudsman found that it was more likely than not that Miss Foster had changed her position based on the incorrect information provided to her, taking into account Miss Foster’s personal circumstances and the fact that she retired shortly after learning that her pension would not be enhanced.

The ombudsman held that Miss Foster had suffered a loss of expectation (meaning the difference between the pension she was given to expect and her actual pension), significant distress and inconvenience and possibly financial loss as a result of the maladministration, and directed NHS Pensions to pay Miss Foster £4000 in compensation.

It is unclear to what extent this compensation was to cover Miss Foster’s financial loss or to compensate her for her distress and inconvenience.