Lawyers have cautioned employers to keep their members fully informed of any pension benefit changes, after the Pensions Ombudsman awarded a Police Scotland employee £2,000.
A determination by Anthony Arter on January 29 this year found that Mr N had been caused severe distress and inconvenience by a failure to notify him that the late retirement factors applicable to the Lothian Pension Fund were to be amended from June 24 2017, adversely affecting his pension.
The police force must also pay him arrears of the pension he would have been entitled to if he had elected to draw it from June 23 2017, within 14 days of the Scottish Public Pension Authority providing the relevant calculation.
The lack of engagement by the employer throughout the ombudsman process was a significant factor in the ombudsman finding against it
James Bingham, Sackers
The ombudsman also highlighted Police Scotland’s “failure to respond to the adjudicator’s opinion within the agreed timescale, and the repeated failure to respond to enquiries”.
This led him to state that “Police Scotland has not treated this complainant with the degree of respect and care that one would expect of an employer towards its employees”.
“It is also consistent with the lack of attention Police Scotland gave to the impact the changes to late retirement factors would have on Mr N’s benefits.”
Companies must act in a timely manner
Experts have suggested that the outcome should provide pause for thought for trustees, but that the particulars of the case might make it unusual.
Nigel Jones, senior associate at Arc Pensions Law, said: “The importance of drawing the information to the attention of potentially affected members was highlighted to the employer [in a circular], and in fact it was instructed to communicate the information as soon as possible.
“Against that backdrop the failure is that much more surprising, and it is difficult to see how the Pensions Ombudsman could have reached a different conclusion.”
Mr Jones warned employers not to rely on a House of Lords decision establishing the very limited duty owed by employers to inform their employees about their pension benefits, telling them “to take care to discharge any obligation placed on them concerning the provision of information to scheme members”.
If they do bet on the Scally judgment, sometimes seen as a ‘get-out-of-jail-free’ card, employers “risk potentially significant costs and the negative publicity that goes hand in hand with an adverse Pensions Ombudsman finding”.
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He added: “Failure to deal with member complaints seriously and in a timely manner will be an aggravating factor when the Pensions Ombudsman determines awards for non-financial injustice.”
James Bingham, partner at Sackers, agreed that “the lack of engagement [by the employer] throughout the ombudsman process was a significant factor in the ombudsman finding against it”.
The duty to inform employees about their options can be a grey area, but Stephen Scholefield, partner at Pinsent Masons, said: “Where a decision has been made to inform employees, so that they have a time-limited opportunity to take advantage of an option before the terms are changed, it is not surprising that the ombudsman is prepared to find maladministration has occurred where this was not done.”
