Provision of incorrect pension information by administrators is a common source of member complaints.  When the error later emerges, the affected member will often complain that they have made decisions based on the incorrect information and that the scheme should not now be able to alter their benefits. However, the schemes are required to administer the scheme in accordance with the governing documentation / regulations and therefore have to pay the benefits prescribed.  Therefore we often see such complaints end up before the Ombudsman.

Typically these are cases that are very difficult for the member to win.  In order to succeed, essentially they need to demonstrate that they have relied on the incorrect information to their detriment, and that it was reasonable for them to do so in all the circumstances.  The member may well be awarded a small amount by the Pensions Ombudsman for the distress and inconvenience caused by the error, and there will sometimes be a finding of maladministration against the scheme administrator.  However, it is rare for the Ombudsman to make an award to restore the benefit to which the member believed they were entitled.

A typical case

The recent decision of the Deputy Ombudsman in Dr Y v Scottish Public Pensions Agency (“SPPA”) is a typical example of such a complaint.  In that case, relating to the NHS Superannuation Scheme (Scotland), the member had been given incorrect information by the SPPA in respect of the amount of benefits he'd accrued and the risk of breaching the lifetime allowance ("LTA").  He had then opted out of paying contributions to the scheme (in order to avoid the penal tax charges resulting from exceeding the LTA).  Dr Y said that but for those communications he would have continued to pay into the scheme, and that therefore he had lost out financially.  Dr Y did subsequently opt back in to the scheme after the mistake had been identified.

The error in benefit calculation arose as a result of Dr Y’s employer providing incorrect information regarding his role (and thus his salary) to the scheme.  In this case, the Deputy Ombudsman made a finding of maladministration by the SPPA in respect of subsequent dealing with Dr Y (including an overpayment of his PCLS) but not in respect of the overstatement of his benefits, as the SPPA relies on the information provided to it by scheme employers.  An award of £1,000 was made for the member’s “serious distress and inconvenience” in respect of the subsequent error. 

However, Dr Y was not entitled to the remedy he sought – namely the reinstatement of the contributions he missed, and added years he was no longer able to purchase, as a result of opting out.  He failed to establish that he had relied in good faith and to his financial detriment on an incorrect statement.  In particular, the Deputy Ombudsman found that there was no evidence that Dr Y had relied on the incorrect estimate in deciding to opt out – the February 2016 letter (which Dr Y said he relied on in reaching the decision to opt out in his April 2016 opt out letter) mentioned the (reducing) LTA and “suggested” Dr Y may have been close to it but did not include the incorrect pension figures (which were in a previous benefit statement). The Deputy Ombudsman noted that “the letter did not say that Dr Y was close to, or in excess of the LTA, nor did it recommend he take any specific action.  Ultimately, it was Dr Y’s responsibility to establish his LTA position, which would have included consideration of the value of his Scheme benefits, as well as any benefits held in other pension schemes”. 

The exception

In contrast, in the decision Ms E v London Pension Funds Authority (LPFA) and Local Pensions Partnership (LPP)  relating to incorrect information provided about a survivor pension entitlement, the member’s partner was successful in her complaint, and was awarded a survivor pension under the LGPS (which she was not entitled to under the Regulations). 

That case concerned the partner of a member who left the scheme and retired in 1991, prior to the introduction of a survivor benefit for unmarried partners in respect of members in active service on or after 1 April 2008.  However, in May 2017, and in serious ill health, the member, Mr N, contacted the LPP via a helpline, to ask if his co-habiting partner Ms E would be entitled to a survivor pension when he died.  He was assured that she would be and Ms E says that, based on this information, they decided not to get married.  When Mr N subsequently died in September 2017, the error came to light and Ms E raised a complaint.

In finding in Ms E's favour, the Ombudsman Dominic Harris said that:

“Mr N was given the reasonable expectation that the Scheme would provide Ms E with a pension on his death. Moreover, he was also given the reasonable expectation that there was no requirement for him to marry Ms E to safeguard her financial future. Mr N was not provided with any other information at the time that may have caused him to question the accuracy of the representation, nor was he signposted to the Scheme regulations or asked to read the Scheme booklet (and, in view of that context and the prognosis of his illness, I am satisfied that it was also reasonable to rely on that telephone call alone, rather than continue to make more detailed enquiries).”

Ms E was able to provide testimonies from a number of witnesses, including his ex-wife and his McMillan nurse, that Mr N told them he would have married Ms E to “ensure she was looked after financially after his death”.  In addition, the LPP did not dispute that Ms E's account of the telephone call and that Mr N had been given incorrect information.  The Ombudsman made an award in Ms E's favour, requiring the Fund to pay the pension to which she would have been entitled had she and Mr N married.  This included interest in respect of arrears to date, and there was an additional £2,000 non-financial injustice award payable in respect of Ms E's severe distress and inconvenience.

Commentary

Generally, proving detrimental reliance on incorrect information is a high bar for members to clear and an award of pension and / or a higher level of benefit is an unusual result.  In Ms E's determination an analogy was drawn with the successful estoppel by representation claim made by the survivor in the Catchpole v Alitalia claim (a High Court decision).  The legal requirements for a successful estoppel by representation claim are:

• an unambiguous representation;
• on which the member relied; 
• in good faith;
• to their detriment.

In Ms E’s case it appears that the Ombudsman was persuaded by:

• Representation: the “clear and unambiguous” statement of “inaccurate and misleading” information that was provided by the scheme to Mr N (not disputed by the scheme);
• Reliance: the independent witness accounts confirming that Mr N would have married Ms E to ensure her financial security; the loan taken out in June 2017 (after the phone call and when Mr N was in serious ill health), on the basis repayments could be made from her survivor’s pension.
• Good faith: Mr N was not provided with any other information that would have caused him to question the accuracy of what he was told.  He wasn’t directed to the scheme regulations or booklet, and was in serious ill health therefore it was not reasonable to expect him to make more detailed enquiries.
• Detriment: Ms E did not receive the pension she would have received she and Mr N had got married.  She was worse off financially as a result, and had to use savings to pay back the loan when the pension was disputed. 

This is to be contrasted with the decision in Dr Y’s case where there was no clear evidence of reliance on the incorrect statements (in fact the 2016 letter on which Dr Y said he had relied contained no incorrect information), and where the Ombudsman clearly expected that he could and should have made other enquiries before electing to opt out.