Information for vulnerable members – what to do?

Jason Shaw

One question that employers and trustees frequently ask is how far they have to go in providing information or assistance to employees/members, especially as the consequences of a wrong approach can be costly. The answer isn’t always clear, but the Pensions Ombudsman has repeatedly held that where a member is particularly vulnerable – for example in cases of serious ill-health – a higher standard may be expected. A recent determination indicates this can go as far as reading between the lines of a request and providing information or options the individual could have asked about, but didn’t. (And in a different context, the PO recently commented that an employer may have a moral duty to inform employees of adverse tax consequences – you can read more in this post).

In this case, Mr Y had been diagnosed with an advanced stage of cancer. His ill health retirement application had been approved and his benefits were due to be paid after a three-month notice period for his employment. A few weeks before his employment was due to end, his condition was diagnosed as terminal and on the same day Mrs Y called his employer (BCC) to ask about accessing his benefits (to fund a short holiday before further medical treatment). Mrs Y and BCC disagreed about the conversation: Mrs Y said that she had asked about bringing forward the payment of his lump sum and pension but was told it wasn’t possible; BCC said she had asked to access part of the lump sum in advance, which wasn’t possible. But the key point is that Mrs Y hadn’t specifically asked if Mr Y could waive the balance of his notice period to receive his benefits earlier (and the BCC employee hadn’t mentioned this option during the call). Mr Y passed away before his planned employment end date.

The Deputy Pensions Ombudsman (DPO) thought that Mrs Y had likely asked only about a part payment of benefits but concluded that BCC should have considered the request more carefully and been more responsive to the subtext: ‘the telephone conversation was of a nature where the [BCC] employee ought reasonably to have enquired as to whether Mr and Mrs Y wished to waive the remaining notice period in order to get access to some money, even if she had not specifically worded the request as such.’ Mrs Y didn’t need to ask in the right technical terms; enough had been said for the BCC employee to raise the possibility of waiving part of the notice period.

In the circumstances, the DPO considered that if Mr and Mrs Y had been given the option, they would have chosen to waive the rest of the notice period. BCC was ordered to pay Mrs Y the difference between the (lower) death in service benefits paid and the (higher) death in retirement benefits that would have been payable, minus the extra income Mr Y had received (on the basis that his employment would have ended at an earlier date), an amount probably in the region of £60,000.

Busy members of HR and pensions teams will likely find the decision challenging, especially since:

  • Mrs Y had been told before that Mr Y’s retirement date could be brought forward if his health worsened; but
  • she didn’t ask further questions or challenge the information she was given on the phone, even though it conflicted with that earlier information (the DPO thought this was reasonable in the circumstances).

Once again the decision highlights the importance of dealing carefully with vulnerable members (and their family). Click here to read about a recent case where a complaint was upheld against trustees on the grounds that they had failed to confirm that a seriously ill member received a letter outlining his benefit options, and had failed to ensure that he understood the significance of the options outlined in the letter.

Jason Shaw is Counsel at Allen & Overy LLP

Comments published on Pensions Talk do not necessarily reflect the views of Allen & Overy or its clients.

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