26 March 2015 - Post by:Jessica Ferrari
We were recently asked by a client which Pensions Ombudsman (PO) decisions we would like to undo. It’s an interesting question, especially in light of the fact that May 2015 will see Antony Arter replace Tony King as PO.
Looking back, the scale and range of PO decisions provide an extremely useful body of guidance, offering an accessible method of dispute resolution for members and an invaluable resource for Trustees and employers. However, there are some tricky areas, either where further clarity would be welcome or where the PO has arguably gone beyond the law as expressed by the courts and perhaps used his powers in a rather extra-legal manner.
Firstly, for example, the position on whether or not a member is, as a matter of principle, responsible for checking benefit quotations, remains a little unclear. In two cases (Hallard & Bore), the PO and the Deputy PO took opposing positions. In a sense, it does not really matter which of these positions is the “correct” one. What trustees need is consistency of approach, so that they know whether or not to resist a member complaint.
Secondly, giving reasons for decisions is an area in which the PO has often pushed beyond the boundaries set by the courts and this in itself has created a degree of confusion – what does the law require trustees to do, and what does the PO expect them to do? For example, how much detail is required in minuting decision-making processes, and how much information needs to be passed on to members? In the Hedley case, the Deputy PO suggested that trustees were guilty of maladministration for recording (arguably) inadequate detail in their minutes, and for providing an insufficiently detailed explanation to the member (simply referring to ‘having considered all the medical evidence’), although this had not actually caused any injustice. This determination represents a high-water mark in the PO’s thinking, but still represents a position which the PO restates from time to time.
Thirdly, it sometimes appears that the PO uses his powers to send a message to other schemes (via advisers and the industry media). One example is the Wainwright case, in which a member was compensated for misinformation, despite the fact that the member had not relied on that information, nor suffered any financial loss. The member was awarded £1,000 for the “loss of opportunity to make a decision based on full information” – this amount is somewhat out of kilter with other compensatory awards made by the PO. It seems instead to be a nudge to the industry to improve the standard of information provision. If this is the case, then it is really a job for the Pensions Regulator rather than the PO, and is arguably out of line on the particular facts of this case.
So, looking forward, with the DC flexibilities being introduced from April this year it is likely that the shape and theme of PO cases will evolve alongside the pensions landscape. We are already seeing pension liberation cases coming through and complaints linked to the new flexible access regime are sure to follow. One area of interest may well be complaints from members in cases where trustees have refused to exercise their power to ignore scheme rules and allow particular forms of flexible access directly from the scheme. It is certainly an interesting time for Antony Arter to be taking the reins and I wish him well with the challenges that lie ahead!
Jessica Ferrari is an associate at Allen & Overy LLP