The Pensions Ombudsman has rejected a number of complaints against the trustees of the old British Steel Pension Scheme, after concluding that communications to members were not misleading and did not amount to scaremongering.
The complaints – which all include a point about the lack of information provided by the scheme’s trustees – concerned cash equivalent transfer values and early retirement factors.
The Pensions Ombudsman accepted 229 complaints in total, but gave final considerations in four lead cases, which were not upheld.
“We appreciate that members will be disappointed with this outcome. However, this has been a long and complicated matter and our investigations have been in-depth and wide ranging, giving 229 members the opportunity to comment individually,” the ombudsman stated.
It is possible for members to appeal to the court, but the reasoning of the ombudsman is compelling and an appeal is far from likely to succeed
Stephen Scholefield, Pinsent Masons
Transfers methodology changed in 2017
BSPS members were asked to decide by December 2017 whether to move their defined benefit pension pots to a new plan, BSPS II, or stay in the existing fund, which was then moved to the Pension Protection Fund as part of a restructuring of pension liabilities.
As a consequence, the calculation methodology behind pension transfers and early retirement factors was changed on April 1 2017, with the result that members who requested a transfer value or retired early from the BSPS after that date received significantly higher benefits than those who had already transferred out or taken early retirement.
The scheme had about 130,000 members, of which 44,000 were deferred, which meant they had the option of transferring out. About 8,000 of these transferred out of the scheme by October 2018, collectively worth about £2.8bn.
In a statement published on Wednesday, the Pensions Ombudsman argued that the communications concerning the BSPS future were not misleading – and were not intended by the trustee to be so – and did not amount to scaremongering.
The ombudsman also stated that setting early retirement and transfer value factors is a matter for the trustee, in respect of which it obtained and considered actuarial advice.
“The trustee acted reasonably in using the early retirement factors and/or cash equivalent transfer values calculation methodology that applied at the relevant time; and subsequent changes to the methodology should not be applied retrospectively,” it noted.
Case illustrates trustees’ difficulties
Robert Welch, a BSPS pensioner who has been helping former colleagues with information, said: "I have had all the paperwork and am bitterly disappointed.”
Pensions Expert understands the former members are now seeking support from parliament to clarify some unanswered questions in the decisions.
But Stephen Scholefield, partner at Pinsent Masons, said these members are stuck with the decisions they made and it is unlikely that any appeal against the Pensions Ombudsman’s decision will be successful.
He said: “It is possible for them to appeal to the court, but the reasoning of the ombudsman is compelling and an appeal is far from likely to succeed.
“In simple terms, allowing members to benefit from improved terms would give them a one-way bet. Instinctively, that is unattractive, and it would need serious failings by a scheme to make that appropriate.”
Mr Scholefield noted that this case illustrates the difficulties faced by trustees in trying to explain what can be complex and fast-moving issues, and the difficulties faced by members in trying to assess and act upon that information.
Trustees not responsible for bad IFA transfer work, scheme professionals say
Advisers to pension schemes have hit out at proposals that the British Steel Pension Scheme should award discretionary payouts to members who mistakenly left the plan, saying it shifts the blame for bad financial advice on to trustees.
“While there were some failings in the financial advice provided in this case, there is always going to be the risk that members assess their decisions with the benefit of hindsight and trustees need to factor that risk into the decisions they make,” he added.
The 229 complainants will have the option to present reasons as to why their case, or any element of it, is substantially different from any of the four lead cases. If successful, their case will be investigated on an individual basis.
