Ill-health

Background

In this case (PO-20087), the Applicant complained that her employer's (the Employer's) delay in processing her application for an ill-health pension (IHRP) (the Application) led to her receiving lower benefits than she would otherwise have been entitled to. This is because her pension was calculated under the National Health Service Pension Scheme Regulations 2015 (the 2015 Regulations), rather than the National Health Service Pension Scheme Regulations 2008 (the 2008 Regulations), which provided more generous benefits. The Applicant contends that the Employer failed to inform her of the deadline for submitting her Application in order for it to be considered under the 2008 Regulations (the Deadline) and failed to expedite her Application.

Deputy PO's conclusions

The DPO dealt with the issue of the Scally duty first. The question of whether and to what extent an employer has a duty to provide information about pension scheme options for an employee has been considered by the Courts on a number of occasions. In Scally v Southern Health and Social Services Board, the House of Lords found that, in a limited set of circumstances, a duty to inform employees about a contractual right could be implied into a contract of employment. The circumstances are that: (i) the terms of the contract have not been negotiated individually with the employee; (ii) a particular term of the contract makes a valuable right available contingent upon the individual taking some action; and (iii) the employee cannot reasonably be expected to know of the term unless it is drawn to his attention. In subsequent cases, the Courts found that there is no general implied duty on an employer to provide information to an employee about a pension scheme in order to prevent economic loss. In this case, the Applicant already knew of the right in question (i.e. her right to apply for an IHRP) so, as the Employer was under no general implied duty to provide information to the Applicant in order to prevent economic loss, the DPO determined that the third limb of the test for establishing a Scally duty was not satisfied and, therefore, a Scally duty did not exist.

The DPO did, however, find that the Employer had a duty to act with reasonable care and skill and without undue delay in processing the Application. Further, the DPO found that the Employer had voluntarily assumed a duty of care to inform the Applicant of changes affecting her Scheme including the Deadline. This finding was on the basis that, in its response to the Applicant's internal dispute resolution procedure (IDRP) complaint, the Employer's business service authority informed the Applicant that Scheme employers had agreed to disseminate information to staff concerning the 2015 Regulations. The DPO believed that the Employer was able to take action which would have expedited the Application sufficiently to meet the Deadline but did not do so. The Employer should have at least: (i) informed the Applicant that it expected a deadline to be imposed for submitting her IHRP request; (ii) expedited her Application; and (iii) informed the Applicant of the Deadline when the date was known. Providing non-specific information about the Deadline and allowing the Applicant to discover it herself through her own research would not have reflected the urgency that should have applied.

The DPO concluded that there had been maladministration on the part of the Employer and, more specifically, that the Employer failed to fulfil its duty to deal with the Application with reasonable care and skill and without undue delay. Consequently, the DPO found: (i) the Employer acted negligently in failing to take the necessary steps to enable the Application to be submitted before the Deadline; and (ii) but for the Employer's negligence, the Application would have been submitted before the Deadline and the Applicant would have received a higher level of IHRP benefits.

The DPO directed that the Employer pay the Applicant: (i) a sum of money equal to the difference between the amount of IHRP benefits that the Applicant had received and the amount that the Applicant would have received had her Application been received before the Deadline (plus compound interest); and (ii) an amount to cover the shortfall in the Applicant's future IHRP benefits under the 2015 Regulations, compared with the future IHRP benefits that the Applicant would have been entitled to, had her Application been received before the Deadline.

Auto-enrolment

Background

The Applicant in this case (PO-23961) accrued a substantial pension entitlement between 1983 and 2014 and subsequently applied for and was granted Lifetime Allowance (LTA) Fixed Protection (FP12) of up to £1,500,000 from HMRC. In 2015, the Applicant began working for the University of Hertfordshire (UoH). A few months before doing so, he received a letter from UoH stating that he would be auto-enrolled into the Teachers' Pension Scheme (the Scheme) and that he had the right to opt out and how to do so. In April 2018, after discussions with his Independent Financial Advisor, the Applicant realised that he had invalidated his FP12 by contributing to the Scheme. He subsequently wrote to UoH requesting it refund his pensions contributions of £816.83. UoH responded by saying that neither it nor Teachers Pensions (TP) could refund the Applicant's contributions because he had over two years' membership in the Scheme.

In July 2018, the Applicant complained to UoH that the potential risks associated with him being auto-enrolled into the Scheme were never explained, he had invalidated his FP12 and faced a substantial tax liability. UoH replied that the information sent to new joiners was a combination of "legally required and informative material", not intended to be exhaustive and that pension taxation was a personal matter. The Applicant made the same complaint to TP via stage 1 of the Scheme's IDRP.

TP replied that it was not the Applicant's employer and had no obligation to assist managing his tax affairs. It also argued it had no way of knowing that the Applicant had substantial pension benefits elsewhere and that he should have been aware of the restrictions of FP12. The Applicant then took his complaint to the Department for Education (DfE) under stage 2 of the IDRP. The Applicant argued TP had taken a "ridiculous and draconian" approach to enforcing the Scheme rules, that his contributions were minimal and that it would be much easier if TP simply refunded them. The DfE said there were no provisions in the Scheme rules that allowed for a retrospective opt out. It maintained that the Applicant had received information pertaining to opting out, UoH had fulfilled its disclosure obligations and TP could not provide the Applicant with financial advice.

The Applicant then took his complaint to the PO.

PO's conclusions

The PO did not uphold the Applicant's complaint and agreed with the conclusions of the Adjudicator. The PO held that there was no requirement under the Disclosure Regulations to provide new Scheme members with guidance about LTA protections. Indeed, a requirement to do so would be an unwarranted administrative burden. Furthermore, neither TP nor the DfE are qualified to provide financial advice and they could not have known that the Applicant had substantial benefits in another scheme unless he had informed them. Ultimately, tax is a personal responsibility and the Applicant should have ascertained the correct position with regard to the terms of his FP12 much sooner than he did. Under the Scheme rules and the Auto-enrolment Regulations, the PO determined that neither TP nor UoH can refund the Applicant's membership of the Scheme in order to mitigate his tax liability.

The PO also noted the recent tax tribunal case of Mr Hymanson, in which it was held that an accidental breach of tax protection rules would not necessarily mean that an individual would lose LTA protection. Therefore, the PO said, it may be that the Applicant can argue his case with HMRC.

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