The Pensions Ombudsman has partly upheld a complaint by a member of the Railways Pension Scheme against its trustee and administrator, RPMI, after finding maladministration in the scheme’s decision to suspend a member’s pension between July and December 2018.
Mr Y’s pension was suspended because he failed to complete a Pensions Security Review Form sent by the administrator in May that year.
The form requested personal information such as name, national insurance number, address, date of birth and dates of employment and also had to be witnessed.
A covering letter stated that if the form was not returned by the required date, then pension payments would be suspended.
Suspension raises a number of complex issues of modern pensions law, and any administrators looking to suspend, reduce or forfeit any members’ pension rights and payments must be extremely careful
Penny Cogher, Irwin Mitchell
However, Mr Y had concerns about the wording of the form, explaining that no one in France would be able to verify his employment history, and would be committing fraud in signing the form as a witness.
As he did not return the form, his pension was suspended. After receiving an internal complaint from Mr Y, the administrator maintained that the pension would be suspended until the form was completed.
On December 17 2018, the pension was reinstated and all arrears paid with compensation of £250, which was raised to £750 on March 16 2019. Throughout the process, the scheme’s defence was that the form was necessary to ensure security over members’ pensions.
However, Mr Y did not accept the further offer of compensation, as he believed an amount of £4,000 was more appropriate.
Mr Y took the case to the Ombudsman complaining of a “sustained campaign of harassment, threats and intimidation” by the management of the scheme and that he had written or emailed the scheme more than 30 times to try to resolve this situation.
The Ombudsman determined that the administrator’s actions in respect of the form, verifying the complainant’s identity and suspending his pension despite sufficient evidence of his ID, amounted to maladministration.
It also held that the suspension of pension caused distress and inconvenience to the complainant on the basis that he was unable to complete the form and would not have known when or if his pension would be reinstated.
Failure of the administrator to refer the issue to stage two of scheme’s the internal complaint process also amounted to maladministration, which lead to further distress and inconvenience.
Nevertheless, the case was only partly upheld by the Pensions Ombudsman Anthony Arter due to the compensation demanded by Mr Y.
Arter said that awards in excess of £1,000 are only given to applicants who “have suffered severe or exceptional distress and inconvenience” as a result of maladministration, and that an award of £1,000 was appropriate in this case.
Pension suspension raises complex legal issues
Reducing a person’s pension entitlement or suspension of payments in cases where a pension is in payment “is unusual”, argued Penny Cogher, partner at Irwin Mitchell.
She said: “Suspension raises a number of complex issues of modern pensions law, and any administrators looking to suspend, reduce or forfeit any members’ pension rights and payments must be extremely careful.”
The legislative framework is set out in section 91 to 93 of the Pensions Act 1995, which protects members from pension rights being assigned, charged or forfeited.
Cogher stressed that “this legislation is strict and must be followed to the letter”.
She added: “Members’ rights are also protected under section 67 of the Pensions Act 1995. In addition, any administrator would need to ensure that they follow, again to the letter, the scheme’s governing provisions which may contain restrictions on suspension of pension payments.”
Cogher said: “It is clear that the Ombudsman considers that suspension is not acceptable where there is reasonable evidence to confirm a member’s identity,” and that it “should be a trustee decision rather than the decision of a pension administrator to take such a draconian action as suspending a member's pension in payment, as the potential for this to cause distress and inconvenience is obvious”.
She pointed out that even for older pensioners based in the UK it could be difficult to give proof of life, since they may have capacity issues and not hold any form of ID or have any utility bills in their name.
“This is definitely an area where administration services should be more imaginative in how they go about asking for proof of ID and what proof they accept.”
Simon Borhan, managing associate at Linklaters, shared this opinion. He said: “Trustees and administrators should ensure that the approach taken is reasonable and proportionate.”
However, these checks are vital, noted Gareth Stears, pension technical consultant at Aries Insight.
“Long-in-the-tooth administrators will tell you one or two stories of relatives living off a pension long after the correct recipient has passed away.”
Admins need to the messaging right
Getting the messaging right is key, but Stears argued that it is “far easier said than done”.
He said: “Pensioners can be mightily offended when you (effectively) ask them to prove that they're alive. The more literary-minded might call it Kafkaesque.”
Stears explained that administrators need to present obstacles a fraudster would struggle to clear.
“That's why the scheme asked for details like periods of employment: something difficult to find out from a deceased pensioner.”
Ombudsman criticises Aon, Willis Towers Watson over benefits error
The Pensions Ombudsman, Anthony Arter, has partially upheld a complaint against Aon and Willis Towers Watson over their handling of a benefits estimation error.
He noted, however, that flexibility is desirable. “It's a good idea to provide options and suggestions, so the pensioner can comply in the easiest/most convenient way for them. Ultimately the scheme accepted alternative evidence of existence (matching signatures), but doing so sooner could have prevented the situation escalating.”
“Another difficult balance is the time the scheme allows. It has to be reasonable. Give too much though and any overpayment grows by the month, and the chances of claiming from an estate diminish,” Stears pointed out.
He concluded: “Pension scheme administrators should keep up to date with modern methods of existence checking, which obviate the need to complete a one-size-fits-all form.”
