Ombudsman orders NHS members payouts after admin errors

In February, the ombudsman told the NHS Business Services Authority to compensate Mrs S over the miscalculation of deferred benefits, an outcome of flawed member data. Mrs S was also awarded compensation over “the significant non-financial injustice” incurred in fighting her case.

The following month, the ombudsman asked the University Hospitals Birmingham NHS Foundation Trust to pay interest on contributions that had been made by Mrs N into an ‘added years contract’, a service benefit that is only available to certain members of the NHS Pension Scheme.

Lack of communication from former employer

Mrs S worked as a nurse for the NHS for 27 years, until September 2009. She became a deferred member of the scheme upon leaving the health service.

There has not been any maladministration on the part of NHS Pensions for not informing Mrs S at the time when she became a deferred member of the scheme of why her SCS ceased

Anthony Arter, Pensions Ombudsman

She complained to the ombudsman that NHS Pensions had used incorrect information to calculate her deferred benefits. The salary and the length of her “reckonable membership”, a type of membership used for calculating the benefits of those belonging to the 1995 section of the NHS scheme, were incorrect.

Mrs S also claimed that NHS Pensions had not told her that she would lose her “special class status” when she became a deferred member.

This status is given to certain qualifying members of the 1995 section of the NHS scheme. While the normal pension age for the section is 60, those who meet the criteria can retire and start receiving their pension at age 55 without being penalised.

A nurse that does not qualify for this status, for example, would lose 21 per cent of their pension and 14.4 per cent of their lump sum if they retired early at 55. Those that do qualify are paid in full.

In response, NHS Pensions said that it had calculated Mrs S’s highest pensionable pay based on information supplied by her former employer while she was still a member of the scheme. 

It subsequently became apparent that this information did not fully reflect her pensionable pay in her final year of employment. Mrs S’s former employer had not told NHS Pensions that her highest pensionable pay had increased to £48,903.46 a year.

NHS Pensions, meanwhile, had estimated Mrs S’s pensionable pay for her final year of NHS employment to be £48,868.12, based on her payslips.

NHS Pensions also said that it does not usually tell members when their special status has ended. Having incurred a service break for more than five years after ending her employment with the NHS in 2009, Mrs S was ineligible for special status in any subsequent NHS employment.

The ombudsman has therefore ordered NHS Pensions to recalculate the early retirement pension and tax-free cash sum available to Mrs S based on this salary, along with her increased total reckonable membership.

The scheme was told to pay Mrs S the additional pension and tax-free cash, backdated to her early retirement date, and also to pay her interest for late payment as is stipulated by NHS rules.

Mrs S was additionally awarded £500 “in recognition of the significant non-financial injustice which she has suffered dealing with this matter”.

Pensions Ombudsman Anthony Arter, however, said that there had not been any maladministration by the scheme over having not informed her of the ending of her special status when she became a deferred member, since the administrator followed the current legislation regarding this matter.

Member ineligible to return to an added years contract

Mrs N joined the NHS scheme in 1995 and began an added years contract in 2009. She left the NHS in 2010, before rejoining the health service and the scheme in August 2013.

Before April 1 2008, the majority of NHS scheme members who could not reach 40 years of membership by their normal pension age could increase their pension benefits by buying ‘added years’.

The most frequent method of payment is the deduction of additional contributions from members’ pay.

In March, the ombudsman partly upheld the complaint of Mrs N, who complained that upon rejoining the NHS scheme she was allowed to make contributions to her previous added years contract in error.

Mrs N said that with proper advice she would not have paid these contributions and would have invested her money elsewhere.

She discovered in December 2016 that no added years contributions had been deducted from her salary. After informing her employer, the University Hospitals Birmingham NHS Foundation Trust calculated the cost of making up for those missed payments, which she paid as a lump sum before resuming her payments.

In 2019, Mrs N was then told that these additional payments could not be included in her pension calculation, as it turned out that she had not been eligible to resume her added years contract in 2013.

UHB told Mrs N that she would have signed a document concerning benefit increases that would have made it clear that a break in her employment with the NHS would mean she could not continue making added years payments upon returning.

She received the offer to purchase “additional pension” to make up the difference, another avenue for increasing her benefits. Mrs N rejected this offer.

Mrs N told UHB that she still wanted her added years contributions to count towards her pension. She then made a formal complaint to the NHS Business Services Authority.

The BSA told her that she had sufficient information about her eligibility for added years payments upon rejoining the scheme, and that she should direct her complaints about not being informed about this to UHB.

The erroneously paid contributions were returned to Mrs N net of income tax and national insurance payments. 

One of the ombudsman’s adjudicators, a first-handler of cases of this type, recommended that UHB pays Mrs N £500 as compensation for the stress she incurred in dealing with this issue. Mrs N rejected this decision.

The Pensions Ombudsman subsequently concluded that while the BSA was not at fault, UHB should have checked Mrs N’s eligibility to contribute to an added years contract before allowing her to do so.

It decided that the fairest outcome would be for UHB to calculate simple interest on Mrs N’s contributions, based on the Bank of England’s base rate of 3 per cent during the relevant time period, and pay this to her within 28 days of its ruling.