In this edition we look at determinations covering issues including: the payment of death benefits; claims of detrimental reliance on information provided by a scheme; the provision of information relevant to a pension sharing order; and due diligence processes in relation to transfers. In the statistics section we provide a breakdown of the overall outcome of the determinations for March and April 2019 and the range of awards made for distress and inconvenience.
In this newsletter references to:
"TPO" mean the organisation The Pensions Ombudsman;
"the PO" mean the Pensions Ombudsman; and
"the DPO" mean the Deputy Pensions Ombudsman.
If you would like to know more about any of the items featured in this edition of Pensions Ombudsman Round-Up, please get in touch with your usual DLA Piper pensions contact or contact Cathryn Everest. Contact details can be found at the end of this newsletter.
A Note About Distress And Inconvenience Awards
In the September 2018 edition of Pensions Round-Up we reported on the publication of new guidance from TPO on "Redress for nonfinancial injustice". This followed an announcement in TPO's Annual Report and Accounts 2017/18 (published in July 2018) that, following some recent court judgments and a review of its existing policy more generally, the Ombudsman considers that an increase to the upper limit for non-exceptional awards for non-financial injustice to £2,000 is appropriate. The guidance states that an award for non-financial injustice will now usually fall into one of the following five categories of award: nominal (no award), significant (£500), serious (£1,000), severe (£2,000) and exceptional (more than £2,000). A section on guidelines for awards includes a table which sets out a description of factors relevant to each of the five categories of award.
Trustees and employers may find it of interest to know the circumstances in which awards in excess of the upper limit of £2,000 have been made in relation to distress and inconvenience.
In March 2019 a determination was issued which related to applications by fourteen different Applicants, whose complaints relate to the
same scheme and are on identical issues (PO-7292 and others). It was concluded that there were breaches of legislation and breaches of trust by the trustees including: breach of the statutory requirement for trustees of schemes with fewer than 100 members to "have regard to the need for diversification of investments, in so far as appropriate to the circumstances of the scheme"; breach of the statutory requirement to obtain and consider written independent advice before entering into an investment; and failing to take appropriate steps to verify the figures contained in the statements of account that they sent to members in relation to the performance of an investment. The PO made directions for the trustees to account to the scheme for certain amounts relating to some of the breaches.
The PO also stated that the trustees' actions amounted to pure maladministration, for example, failure to produce statements and lack of attention in respect of the fees, charges and commission structure. The PO stated that the trustees "acted incompetently in assessing and addressing various conflicts points" and that during the oral hearing that took place in relation to this case, it was apparent that the scheme "was administered almost entirely without established process or procedure". The PO therefore also directed the trustees to pay the sum of £5,000 to each of the Applicants "in recognition of the exceptional level of distress and inconvenience suffered by each of them over a prolonged period of time".
PAYMENT OF DEATH BENEFITS
The Applicant's complaint in this case (PO-20255) relates to the decision not to pay her death benefits following her husband's death. The Applicant and the member married in 1981. In 1987 the member took out the pension with the provider and he subsequently completed an Expression of Wish form naming the Applicant. The Applicant and the member separated in 2007. A will made by the member in October 2015 referred to two other pensions, stating that the surviving partner's pension in respect of one of them should be paid to the Applicant, with the other one being paid to his current partner (referred to in the determination as "Miss Y"). An updated will was completed by the member in April 2017 which elaborated on the previous will but it was not witnessed. The April 2017 will made the same reference to the two other pensions as had been included in the October 2015 will. It also made provision for "all other funds including any monies in the bank, savings, proceeds from private pensions and shares" to go to Miss Y to cover an outstanding mortgage debt.
Following the member's death in May 2017, the pension provider informed the executor of the member's will that, according to the Expression of Wish form, the member wished the Applicant to receive the death benefits and stated that she should therefore complete and return an enclosed claim form. The Applicant completed the claim form and returned it to the provider in July. However, also in July, solicitors for the member's estate made a representation stating that the benefits should be paid to Miss Y. In August 2017 the provider decided to pay the death benefit to Miss Y with its internal notes stating: "Pay to partner as she has financial dependency & policyholder will shows he intended for her to benefit from his pension policy. EOW disregarded as it was for his former wife".
The Applicant brought a complaint to TPO about the provider's decision not to pay the death benefits to her and its handling of her enquiries and complaint in relation to this.
The DPO concluded that the provider had made insufficient enquiries of the Applicant and Miss Y to ascertain their respective dependencies before deciding how to distribute the death benefits and the Applicant's complaint was therefore upheld. The Adjudicator's findings (with which the DPO agreed) included the following.
- The Applicant submitted further information on 6 August 2017, partly rebutting what the estate had said in its representations. The estate made two further submissions in August 2017 but the Applicant did not have an opportunity to make further submissions, even though the information given by each of the parties was contradictory (for example, the Applicant had made it clear that she and the member remained married and stated that they were committed to their mutual financial security, whereas the estate's submissions included that this reference to mutual financial security was not correct). The Adjudicator stated that the provider should have requested clarification and evidence to support the arguments being made by the estate and the Applicant before it reached a decision.
- It was unclear from the submissions whether the provider had received evidence of Miss Y's dependency, and there was no sign that it satisfied itself that the Applicant was not also dependent on the member.
The DPO made directions for the provider to make a fresh decision about how to distribute the death benefits, although the DPO made it clear that in making her directions, she did not intend to express any opinion as to the appropriate distribution of the benefit. The DPO stated that, before making a fresh decision, the provider should acknowledge the Applicant's marital status and consider any additional evidence of financial dependency that the Applicant and Miss Y may wish to produce. The DPO also directed that, in communicating its decision to the potential beneficiaries, the provider should state its reasons, highlight the rules used to make the decision, and highlight the information and evidence taken into account. The provider was also directed to pay the Applicant £500 in relation to the significant distress and inconvenience caused.
In this case (PO-23187) the Applicant's late father was in receipt of a pension from a public service pension scheme when he died in January 2017. On 18 January 2017 the scheme received a 'Notification of the death of a person to a Government Department or other specified body' form in which the Registrar notified it of the member's death. The Applicant's sister (referred to in the determination as "Ms Y") was listed on the form as the named informant. There was a residue of pension owing to the member's estate of £550.33 which represented the pension due from 25 December 2016 to 5 January 2017 and this was paid to Ms Y. When the Applicant contacted the scheme to notify it of the member's death (unaware that it had already been notified), he was informed that the member's pension had been finalised. The Applicant submitted a complaint saying that he could not understand why the payment was released without his signature as co-executor (a Grant of Probate issued on 3 April 2017 named the Applicant and Ms Y as executors).
The regulations governing the scheme included provision allowing amounts below a specified level to be paid, without requiring the production of probate or other proof of title, to the deceased's personal representatives or to the person (or among any one or more of any persons) appearing to the Secretary of State to be beneficially entitled to the deceased's estate. The PO stated that the scheme's decision to accept Ms Y as the member's personal representative or the person appearing to be beneficially entitled to his estate appears to be based on the fact that she was named on the form received from the Registrar and on the death certificate as the informant, and she provided her details in response to its request for information on who the residue of pension should be paid to. Aside from matching this information, the PO could not see that an exercise was carried out whereby the scheme verified that the person claiming the residue of pension met the relevant criteria. The PO stated that instead the scheme "seems to have issued the relevant information to the death informant in the expectation that they would pass this on to the correct individual" and that in his view this is "a process which relies on the honesty of the person initially written to, as opposed to one with checks and balances". Whilst the PO thought that the scheme's position that it did not wish to upset family members by questioning the person's status was understandable, he also stated that it would be "counterproductive if this objective were to override that of paying the monies to the correct person".
However, it was also noted that even if the scheme had taken action to establish the personal representatives or beneficiaries of the member's estate, it would still have been entitled under the scheme regulations to have made the payment to just one of the personal representatives. This meant that the payment could be made to Ms Y. The Adjudicator therefore stated that, whilst the scheme should have done more to establish that the payment was being made to a person entitled to the estate or a personal representative, the overall outcome was not wrong. The PO also accepted that in this instance the payment was ultimately made to an appointed executor of the member's estate and therefore he did not find that the scheme had made an administrative error.
The Applicant's complaint was nevertheless partly upheld in relation to the way that the matter was handled. The Adjudicator thought that the scheme could have done more to assist the Applicant once it had been made aware that he was a joint executor of the estate and had raised concerns about the payment of the monies. The PO stated that the scheme did not provide any explanation or guidance as to its wider process and objectives when paying these benefits and there is a "distinct lack of sympathy on its part in a difficult matter". The scheme also stated that it would write to the recipient of the residue of pension to seek a mutually satisfactory solution but did not update the Applicant on this. The Applicant's complaint was therefore partly upheld and he was awarded £500 in recognition of significant distress and inconvenience.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.