25 November 2009 - Post by:Helen Powell
US President Harry S Truman famously had a sign on his desk reading “The buck stops here”, to show he took personal responsibility for the way the country was governed.*
When something goes wrong in a pension scheme and a member complains, we’re often asked where (according to the Pensions Ombudsman) the buck will stop. Perhaps it’s a sign of the times that, with more pension schemes outsourcing their administration to third party providers, those administrators seem to be coming in for more flak from the Ombudsman these days.
In a recent determination, the Ombudsman has picked through a series of delays in sorting out a pension sharing order, and has set very specific timelines for particular stages of the process. The surprising thing about this case is that the order was implemented before the four month period allowed by law had elapsed – but the Ombudsman still found that delays by the administrators amounted to maladministration. So, for example:
• the administrators had taken 16 days to ask for the member’s fund value – they should have made the request after no more than 5 days;
• the request for assets to be disinvested should have been made within 6 working days rather than 20;
• it should have taken 3 working days (rather than 17) to raise and send a cheque.
Although this looks like law-making by the back door, administrators do need to take notice of these deadlines. If that’s what the Ombudsman calls unreasonable delay in one case, then he’s likely to be consistent in another, barring exceptional circumstances.
But what does it mean for trustees? Can the buck be safely passed to the administrators? Well, no: in another recent determination, the Deputy Pensions Ombudsman has hauled trustees over the coals for failing to keep an eye on their administrators. They may have delegated their administration services, but the trustees were still responsible for monitoring how those services were carried out. They knew that the member had asked for a benefit quotation, and were on notice that the administrators and insurer had service standards to comply with, so they should have chased up the request much sooner than they did. Had they done so, the member would have been able to get a higher pension. The trustees were ordered to make up the difference.
If you’re a trustee of a large scheme, this may not seem particularly realistic. You may not even know, between one meeting and the next, that a request has come in. But you need to have processes in place so that someone is monitoring these issues and can be pro-active in following them up; and you need to take reports on administration service standards seriously. The buck is bound to stop somewhere – and it can be costly when it does.
* A lesser-known and more perplexing fact is that on the back (the side that the President normally looked at), the sign said: “I’m from Missouri”.
Helen Powell is a senior professional support lawyer at Allen & Overy LLP.