In recent times the Pensions Ombudsman has awarded increased levels of compensation for distress and inconvenience.
However, in Mr D v Centrica Plan Trustees Limited (the Trustees) and Mercer Limited (Mercer) the Deputy Ombudsman held that, despite agreeing with Mr D’s complaint, an offer of £1,000 made by the Trustees and Mercer was sufficient compensation for maladministration resulting in non-financial loss as the offer was in the region of the amount that she would normally award.
Mr D had worked for his employer for around 36 years, when in 2016 they began a restructuring exercise which meant that Mr D’s job was no longer required. He was therefore told that he would have to either apply for a new role within the company or opt for redundancy.
Mr D obtained a benefits statement on 9 September 2016 which contained his pension options at that time, one of which was receipt of an annual pension of £30,865.94 plus a tax-free cash lump sum of £147,826.33. The statement had an “important information” section which noted that the quote was “produced for information only” and “was not proof of entitlement to benefits” as “all benefits must be calculated and paid in accordance with the trust deed and rules of the Plan”.
Mr D decided on that same day that he would take redundancy and chose to take the pension option above.
In March 2017, Mercer (the scheme administrators) wrote to Mr D to let him know that a sum of £153,933.01 had been paid in to his bank account, although the amount actually paid was £147,826.33. Mercer also informed him that his annual pension was £28,693.51 with effect from 31 December 2016, which would then increase to £28,764.72 from 1 April 2017.
Mr D complained that his annual pension was £2,101.22 less than the quote in the statement and queried why the lump sum was lower than what he had been told by Mercer.
Following an internal dispute resolution procedure the Trustees agreed that Mercer had made an error in their previous letters by overstating the benefits available to Mr D. However, the Trustees were unable to pay Mr D benefits that he was not entitled to under the scheme rules. The Trustees therefore apologised and offered Mr D £1,000 for distress and inconvenience caused.
Mr D complained to the Pensions Ombudsman that he had made his decision to take redundancy based on the quote that had been provided to him in September 2016.
The Deputy Ombudsman held that no further action was required by Mercer or the Trustees as the compensation offer of £1,000 was sufficient. The Trustees (via Mercer) had provided incorrect information in September 2016 and March 2017 which amounted to maladministration. However, the Deputy Ombudsman agreed that the Trustees were only able to pay Mr D the benefits he was entitled to under the scheme rules unless Mr D could show that he had been provided with a clear and unequivocal statement in relation to the increased benefits, which he had reasonably relied upon to his detriment. The burden of proof for this would be on Mr D.
The Deputy Ombudsman held that such criteria were not satisfied in this case as:
- There was no clear statement of entitlement. The quotation based on which Mr D had claimed to make his decision to take redundancy clearly stated that it was only an estimate and was subject to change. Upon reading the disclaimer Mr D should have thought to check the exact amount of the benefits to which he was entitled before making such a significant decision.
- Although Mr D claimed that he had based his family’s future on the financial options provided – his son and daughter started university in September 2016 so Mr D claimed that he would have stayed in another role at the company – the Deputy Ombudsman was of the opinion that Mr D would have taken redundancy in any event and therefore did not only rely on the quotations in making his decision. It was unlikely that Mr D would have made such an important decision based on only financial factors that quickly (the same day he received the estimated quotation). Mr D had previously said that his reason for taking redundancy was that none of the six alternative job roles he could apply for were compatible with his skills. It was clear then that Mr D had taken other factors into account aside from his pension benefits.
Given the correct amount was a reduction of only £170 per month, along with the reasons cited above, it was unlikely that Mr D would not have taken redundancy if the correct figures had been presented to him from the start. He did not take steps to mitigate his circumstances on realising that his income would be lower than originally quoted, for example by applying for employment elsewhere.