|
It is often said that the secret to a good relationship is good communication. As we know, pensions are complicated and with the best will in the world communications between pension scheme trustees, employers and administrators on the one hand and scheme members on the other could sometimes be done better.
A great many of the cases which end up with the Pensions Ombudsman involve bad communications or allegations that communications could have been better. This article examines some determinations by the current Pensions Ombudsman, David Laverick, on this theme.
1. Taking into account the position of the recipient of information
In Snow (K00346), the Ombudsman considered the need to take into account the specific circumstances of the scheme member. The member in question had learning difficulties. He was not eligible to join the scheme when he began employment but subsequently became eligible to do so. Announcements had been given, but the question arose of whether he should have been specifically informed of his right to join the scheme given his learning difficulties.
The Ombudsman upheld the complaint and said that as a matter of good administrative practice the employee should have been treated on an individual basis and Mr Snow's disability should therefore have been taken into account. The Ombudsman ordered Littlewoods to augment his benefits to reflect membership of the scheme commencing when he first became eligible. This was subject to Mr Snow paying backdated member contributions plus interest.
In the case of Albert de Luynes (M00858) a member’s widow complained that she had been treated with bias, neglect, delay, inattention, arbitrariness, incompetence and ineptitude. The Ombudsman concluded as follows:
“This is a sorry tale of administrative error and official high-handedness. Since the death of the Complainant’s husband, senior officers of the Council have felt obliged to apologise to his widow on more than one occasion. The administrative errors which prompted these apologies relate for the most part to the failure of the Pensions Section to respond to letters and to keep the Complainant properly informed. The cumulative effect of these errors on the Complainant was distressing in the extreme and I have no hesitation in categorising them as maladministration. A decision was taken far too late in the day to have the matter handled by a different officer than the one whose actions on inaction had occasioned the apologies. I have seen little evidence, however, that the change of person led to a change of attitude on the part of the Council. … For all the wrong reasons this sorry saga can be used as a case study of how not to deal with a bereaved spouse.”
The Ombudsman made an award of £2,000 for distress, which is highly unusual. The court in City & County of Swansea v Johnson [1999] OPLR 39 ruled that distress awards by the Ombudsman of more than £1,000 should only be given in exceptional circumstances. In this particular determination, the Ombudsman has obviously concluded that in the special circumstances of being recently widowed, it was particularly important for communications to be handled sensitively.
2. The need to give proper explanations
The Ombudsman clearly believes that in certain circumstances explaining the position to members is important.
In Wall (L00009), the husband of a deceased member informed the Teachers Pension Scheme of the death but the scheme continued to pay a pension for 7 months and then asked for the money back. It was held that it was not inequitable to recover the money and the Ombudsman indicated that he was pleased that the recovery was planned to be phased over 12 months. However, it was maladministration not to give an explanation of the overpayment and £500 was awarded for the related distress.
An issue which has been considered by the Ombudsman in a number of cases is consideration of ill-health early retirement pensions and the desirability of giving explanations to members.
In Clifton (K00519), the Ombudsman commented that as a matter of good administrative practice, the trustees should give reasons for their decision not to award an ill-health pension. He said it is difficult for a member to appeal a decision for which no reasons are given. The trustees were ordered to give reasons for their decision when the member next applied for an ill-health pension.
In practice, employers and trustees rarely as a matter of course give proper explanations to members about why their ill-health pension application has been rejected. Sometimes there will be medical reasons why certain evidence should not be given to the member e.g. where they have a serious depressive illness and the sight by the member of the evidence may be detrimental to their health.
However, in ordinary cases the Ombudsman clearly feels that where employers and trustees are rejecting applications, they should explain to the member why this is. In practice, this will inevitably lead to many members seeking to challenge the evidence on which the trustees/employers have based their decisions. However, if these members are objecting to a rejection of their application then they are almost certainly going to engage in the IDR process and go to the Ombudsman if they are still not satisfied. Therefore the provision of explanations and the possibility of the decision-maker having to review the position and potentially obtain further medical information may help to nip such complaints in the bud, or at least show to the Ombudsman that the matter has been properly investigated.
3. Notifying members about specific events
To what extent should trustees be proactive about notifying members about specific information or events beyond the requirements already contained in pensions legislation or their scheme rules? The position was considered by the Ombudsman in Lambeth (L00195), which dealt with changes in the rates of return on AVCs.
Mrs Lambeth complained that the trustee of the University of York Pension Fund and her employer, the University of York, failed to monitor the Fund’s AVC investment performance as closely as was necessary to take action when the interest rates offered were suddenly and substantially reduced. Mrs Lambeth commenced paying AVCs to Northern Rock on 11 March 1985. On 25 October 2000 she wrote to the University’s pensions manager, expressing concern about the interest rates offered from 1 June 1998 to 30 November 1999. She explained that she believed the interest from other providers had increased over the same period.
The Ombudsman found that there was no proper monitoring of the AVC investment by the trustee’s staff. He found that this amounted to maladministration. The fact that Northern Rock’s interest rates had become uncompetitive should have been noticed.
He also said that had the performance been properly monitored, concern would have first been raised in December 1999 and a further review in December 2000 would have shown no improvement so that there was a strong possibility that a change of AVC provider would have resulted in mid-2001, but no action would have been taken faster than it actually was. Therefore, the Ombudsman found that Mrs Lambeth did not suffer any financial loss due to the maladministration.
However, he also found that as a matter of good administrative practice the trustee should have provided Mrs Lambeth with copies of Northern Rock’s notifications of interest rate changes as and when they occurred. The failure to do this was maladministration.
In other cases the Ombudsman has usually been supportive of the principle that trustees, administrators and employers generally do not need to be proactive about giving information and/or advice to members (this is in line with court cases on the same topic).
4. Courtesy/rudeness
Being courteous can sometimes be a particularly difficult aspect to get right, especially when dealing with members who themselves can become frustrated and aggressive over administrative failings or perceived unfairness in the way they are being dealt with (even though it may be perfectly lawful). The following cases are examples of where the Ombudsman has and has not concluded that maladministration has occurred as a result of the tone used by schemes and administrators.
In Cooke (E00435), the Ombudsman concluded as follows:
“The Complainant has stated in his Details of Complaint or Dispute form:-
[The Employer]'s behaviour to me over the last four years has been disingenuous, rude, misrepresentative, upsetting, untruthful, made me to look foolish, small, ignorant etc and has created a smokescreen [over Inland Revenue limits] and tried to bulldoze their way over me, hoping that I would give up and capitulate. (Most of the above phrases are original comments by OPAS and other third parties).
I can find no evidence, however, of any maladministration in the handling of the dispute. The Employer and the Complainant have taken diametrically opposed views over the Complainant's benefit entitlement, but the Employer has in my opinion always answered the enquiries of the Complainant and of the OPAS adviser with courtesy and to the best of its ability. It has generally apologised when mistakes have been made or delays have occurred, as the Complainant readily acknowledges.”
In Poole (L00093) the Ombudsman made the following comments, which illustrate that where administrators admit they have made mistakes, this may be looked on with some favour by the Ombudsman.
“I will now turn to Mrs Poole's complaint about delays and other maladministration on the part of TP. I have no wish to add to the already very complex circumstances of this case. It was not particularly surprising that TP's accounts section continued to send reminders to Mrs Poole asking her for her instructions about repayment, because there was still an unpaid amount due to the Scheme. Apart from this, I will restrict myself to saying that I am not satisfied that Mrs Poole has justified her complaints that TP was evasive, aggressive, condescending or rude. In my view, TP has tried hard to deal with an unusual series of events and to explain to Mrs Poole what it has done. It accepts that mistakes have been made and, having reviewed all the correspondence (full details not given above), I consider that Mrs Poole has suffered some inconvenience and that the appropriate level of compensation for this injustice is £200.”
The importance of tone and sensitivity is further illustrated in the case of Fenucci-Corsini (N00031), which concerned the reclamation of overpaid benefits. The Ombudsman said this:
“There is no great injustice in receiving money to which one is not entitled but injustice can be caused in the way that such money is reclaimed.
I can accept there is no easy way to advise someone that they owe sums of money – particularly when the amount equates to a significant proportion of that person’s annual income. For this reason, I do not criticise the first two letters from Mrs Exley. However, with seemingly no further correspondence in the meantime, Ms Fenucci-Corsini was then faced with an invoice for almost £2800 with a request for a cheque. This is followed shortly after by a series of what are very clearly standard form letters of an increasingly threatening nature in respect of seeking the repayment. This is despite Ms Fenucci-Corsini’s correspondence, attempting to understand why the overpayment occurred and why she was expected to repay it.
Standard letters have their value but, at the end of the day, they are going out to an individual and they should reflect the relevant circumstances. I am pleased that, following the spate of letters addressed to “Dear Sir/Madam”, matters were once again taken in hand and addressed more sympathetically and with an attempt at finding a workable resolution. I do not doubt, however, that the tone of the correspondence shown by Teachers’ Pensions in the earlier stage added to the strain Ms Fenucci-Corsini was already under and caused her further distress and inconvenience. I have made a direction to compensate for this.”
A version of this article appeared in PMI news on 01/01/05
|