The Pensions Ombudsman has ruled in favour of a former bank employee in a dispute about the transfer of deferred pension liabilities, in a case reinforcing the impact that poor data management can have for schemes and members.
The case was brought by Mr N, who went to the ombudsman to settle the question of who was responsible for – and refusing to pay him – his full deferred pension.
He had initially approached Capita, who administered the Clydesdale Bank Pension Scheme, to enquire about rights he accrued while working for the bank from 1975 to 1986. After a chain of correspondence, Capita told Mr N that it could find no record of his deferred benefits, and concluded it was most likely he had transferred out.
The ombudsman contacted HM Revenue & Customs, which concluded that liability had transferred to the Bradford & Bingley Staff Pension Scheme 1991, and thereafter to HSBC Bank Pension Scheme.
Things became tricky when Deloitte, which administered the B&B scheme, was unable to find any record of the transfer of benefits from the Clydesdale Bank Pension Scheme.
It’s the most fundamental trustee duty: to pay the correct benefits to members of the scheme
Matthew Swynnerton, DLA Piper
It was later confirmed that whatever information the Clydesdale Bank scheme might have possessed that would provide clarity had long ago been deleted in accordance with the Data Protection Act.
The trustee of the B&B scheme told the ombudsman: “As things stand, it is difficult for the trustee to form a view on whether the member’s contracted-out benefits accrued in the Clydesdale Bank scheme were ever transferred into the B&B scheme.
"It appears not, given that there is no correspondence confirming this and the administration records do not show such a benefit.”
The B&B scheme disputed the opinion of the adjudicator, who had decided that it was most likely a failure on the part of the B&B scheme to account for the transfer of benefits from Clydesdale Bank.
The case then went to deputy pensions ombudsman Karen Johnston, who ruled that, “on balance of probabilities”, Mr N’s deferred pension rights in the Clydesdale scheme had transferred to the B&B scheme.
As a result, she said: “B&B trustees shall reconstruct the transfer of pension rights from the Clydesdale Bank scheme, calculate the deferred pension available to Mr N in the B&B scheme, and inform Mr N accordingly.”
Schemes should ensure their data is ‘shipshape’
Matthew Swynnerton, partner at law firm DLA Piper, told Pensions Expert that this case provides yet another argument for the importance of schemes keeping adequate records.
He said: “Neither the B&B scheme nor the Clydesdale scheme had good records as to what had happened to his benefits. An element of [Mr N’s] pension seems to have gone astray along the way.
“By using [guaranteed minimum pension] tracing, the ombudsman has concluded that on balance of probabilities an element of his pension was transferred from scheme one to scheme two but not from scheme two to scheme three,” Mr Swynnerton explained.
While it is understandable that the Clydesdale scheme had deleted Mr N’s data, not least to comply with General Data Protection Regulation requirements, “the case highlights the importance of maintaining good data”, he said.
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“Bear in mind we’re going back a long way here – we’re going back to the 1980s. It does create data risks if schemes hold on to records for an unnecessarily long period of time. And it’s probably a challenge to do so just from a logistical and administrative perspective.”
Though balancing the need to protect members’ data with the need to maintain adequate records may at times be difficult, Mr Swynnerton nonetheless maintained that it is not an impossible task.
“It’s the most fundamental trustee duty: to pay the correct benefits to members of the scheme,” he said.
“Poor data means that won’t happen, and that’s what happened in this case. That appears to be down to poor record-keeping.”
Data retention ‘is one of the challenges’
ITM director Maurice Titley concurred, but added that there may be a number of reasons why schemes might struggle to retain relevant data, especially when that data is several decades old.
“I suspect that probably the biggest cause [of slip-ups] is when pension schemes themselves migrate administration,” he explained.
“We do a lot of data audit work, and you quite often find there’s a cut-off point where certain parts of the data were not migrated. At the time it might have been a capacity issue on systems, but sometimes it’s a decision of convenience not to bring on transfer-out records.”
Another challenge, especially when dealing with old data, is that much of it will not have been digitised, Mr Titley added. “This is another area that is a big factor in terms of projects like GMP equalisation, where the information that’s needed to revisit the past hasn’t been [digitised].”
While multiple transfers over many decades might be difficult to keep track of, “the system needs to keep up with it”, he said. “It’s one of the challenges the industry has.”
