The Weir Group Pension and Retirement Scheme, along with its former administrator Capita, have been ordered by the Pensions Ombudsman to pay a member £2,000 over the poor handling of his transfer value information.
Mr N complained that in 2019, Capita had failed to give him cash equivalent transfer value details and information regarding early retirement benefits available to him in a timely manner.
He also accused Capita of having provided incorrect information for years concerning “numerous CETV and early retirement quotations”. Having left his job with Weir in 2018 and taken up a part-time job at a school, Mr N had relied upon these benefits “to his financial detriment”.
Failure to hold accurate data is a breach of the basic fiduciary duty of a trustee
Margaret Snowdon, PASA
The problems caused Mr N “considerable distress and inconvenience”, the ombudsman’s notice read.
Errors made by Weir’s in-house team
Mr N became a deferred member of the scheme in 2015. He had also transferred three old pensions into the scheme.
According to Mercer, the scheme’s actuary, the guaranteed minimum pension figure for one of Mr N’s transferred pensions was around £10,500 a year higher than the figure found in HM Revenue & Customs’ data, according to Capita’s records.
Mercer and the scheme opted to use HMRC’s figure, having decided that they could not justify using the overstated calculation.
An incorrect revaluation rate and an excessive amount of revaluations had also been used to overvalue and increase the GMP respectively for Mr N’s first transferred scheme.
These calculations formed the basis of Mr N’s quoted benefits, which he used with his financial adviser to compare the scheme’s benefits with those from an annuity.
In April 2019, Mr N’s new financial adviser asked Capita to provide the details of his current CETV and the scheme’s early retirement benefits, assuming he would retire in October 2019.
Capita had difficulties reconciling the GMP, in part because of the problems it encountered in getting information from HMRC.
The company told Mr N’s financial adviser in response to frequent requests that it was unable to offer the requested information as it had yet to complete the GMP reconciliation.
The scheme actuary subsequently took responsibility for the calculations.
“During the calculation process, the actuary discovered that errors had been made in the calculation of transferred-in benefits,” the trustee told Mr N in December 2019, with the transfers being received and made “by Weir’s in-house pensions administration team, prior to the administration service being passed to an external provider”.
Correcting the errors yielded a lower level of benefits than Mr N had previously been quoted.
Capita apologised for the delays Mr N had experienced and offered him a goodwill payment of £750.
This was improved to £1,000 following the member’s reply that he was dissatisfied with this response, in part owing to the incorrect valuations offered to him that informed his decision to leave Weir and the distress he had experienced.
While apologising for the errors, the trustee said that there was no evidence that Mr N would have remained at Weir had he received the correct information, nor that he had suffered “unavoidable financial loss” by depending on the incorrect figures.
Mr N rejected the increased compensation offer and referred the matter to the ombudsman.
Poor data sits at heart of the problem
In some cases, pension transfers can be notoriously complex. But Margaret Snowdon, president of the Pensions Administration Standards Association, said that poor data quality held by the scheme was the key issue here.
“If the data is correct, even the most complex of situations can be navigated and the huge costs of dealing with a complaint as well as the stress avoided,” she said.
The ombudsman partly upheld Mr N’s complaint, ordering the scheme and Capita in January to pay him £1,000 each in response to the stress Mr N had endured over the saga.
It observed that Mr N had entered his financial commitments based on the incorrect quotations at his own risk.
“Trustees and administrators should take every opportunity to understand the accuracy and completeness of data and take action on errors. Failure to hold accurate data is a breach of the basic fiduciary duty of a trustee,” Snowdon added.
Reverting to bundled actuarial-administration services and offshoring is not the solution
Girish Menezes, Premier Pensions
David Brooks, technical director at Broadstone Corporate Benefits, noted that trustees often have to take responsibility for the mistakes of third-party or in-house administrators.
“What trustees can do is step up when the error has been identified to ensure that it is resolved quickly and efficiently,” he observed.
“The complaint handling and rectification process — if necessary — is central to this.
“Trustees are often either slaves to the internal dispute resolution procedure and rush responses to meet deadlines, or overlook them while their focus is on resolving the issue.”
Weir scheme switches administrator
In August 2019, Mr N complained to Capita about the poor service he and his financial adviser had received when handling his requests, a complaint that went without response for weeks. He subsequently referred the matter to the scheme trustee in October 2019.
In cases like these, Brooks emphasised the need to communicate with members in Mr N’s position, even if the outcome is disappointing for one party.
“This can avoid complaints escalating and the level of distress also increasing,” he said.
Girish Menezes, head of administration services at Premier Pensions, said that administrative errors are the result of a historic view of administrators by trustees and pension providers as “a cost centre and loss leader”.
“This has resulted in underinvestment in data quality, automation and resourcing,” he observed, warning that “reverting to bundled actuarial-administration services and offshoring is not the solution”.
Prudential reports itself to regulator over AVC failings
Prudential reported itself last year to the Pensions Regulator, as a perfect storm of IT problems and coronavirus-led disruption pushed customers looking to cash out their additional voluntary contributions into long delays.
Capita has been under scrutiny over the quality of its pensions administration for a number of years, with the NHS Pension Scheme and the Teachers’ Pension Scheme last year among those to have experienced problems.
A Capita spokesperson said: “Our disputes team were in contact with the customer to reach a resolution. An offer of compensation was made in recognition that, in this case, the level of service fell below our typically high standard.”
In December 2021, the administration of the scheme moved from Capita to Mercer.
