Schemes have been urged to maintain open channels of communication with employers and members around ill-health benefits after an ombudsman determination ruled against a member’s attempt to "rewrite history".
In a complaint against Worcestershire County Council, Mrs Sarah Ascough said her deceased husband should have been considered for an enhanced ill-health benefit before he left employment, and that she should receive the corresponding enhancements to spousal benefits following his death.
Before being made redundant, Mr P Ascough had been seriously ill and in January 2013, the council emailed him to ask whether he had considered or discussed with the HR department the early payment of his pension on medical grounds.
At that point the council provided explanation of the three tiers of medical retirement available under Local Government Pension Scheme rules and the criteria that had to be met in order to qualify for these benefits.
Mr Ascough later lost his job with Worcestershire County Council when he was made redundant in May 2013, after which he became increasingly ill.
At the time of his death in September 2014, Mr Ascough was receiving an ill-health pension from the Worcestershire scheme, but this was the early payment of his deferred pension and not the enhanced pension under regulation 20 of LGPS scheme rules he would have received had his employment been terminated on grounds of ill health.
Ill-health enhancements
To be entitled to an enhanced ill-health retirement benefit under LGPS regulation 20, members must have:
at least two years’ total membership of the scheme;
employment with participating sponsors terminated on grounds of ill health;
reduced prospects of obtaining gainful employment prior to normal retirement age.
In his determination, pensions ombudsman Anthony Arter said he could find no evidence to suggest that the termination of Mr Ascough’s employment was on grounds other than redundancy.
He upheld the council’s decision that it would not be appropriate to change the grounds of dismissal retrospectively and pay an enhanced ill-health pension.
Mr Arter addedit was possible that Mr Ascough may have misunderstood the difference between a pension paid under regulation 20 and a deferred pension paid early on ill-health grounds, but found no maladministration on the part of the council.
This shows you can’t rewrite history. Members don’t always understand, but trustees and administrators can only give them so much information
Wendy Hunter
“At no stage did he query [details of his deferred benefits], or ask whether the benefits would be different had he retired on medical grounds,” Mr Arter said. “Any misunderstanding on his part was not due to any advice the council may have given him.”
Complex structures
Wendy Hunter, partner at law firm Squire Patton Boggs, said it was not uncommon for members to misunderstand or confuse complex scheme rules and benefit structures and the ombudsman ruling was the only plausible outcome given the facts of the case.
“This shows you can’t rewrite history,” she said. “Members don’t always understand, but trustees and administrators can only give them so much information.”
Nicola Rondel, partner at law firm Hogan Lovells, said the determination evidenced how quickly scheme members can “get out of their depth” and struggle to ask the right question, underlining the challenge of member communications.
“In the ebb and flow of daily life it can be really difficult to nail down exactly what [members] need to know when they ask a question,” she said.
“The member has to do due diligence… they have to be resourceful and examine the [scheme] materials themselves.”
Audit trail
The latest determination underlines the importance of recording and evidencing discussions and meetings with members and sponsoring employers.
Following proper procedure and having an audit trail is key for trustees and managers, said Brent Wright, partner at law firm Osborne Clarke.
“[At] trustee meetings or [meetings with members] where benefits are discussed, it’s good policy and practice to have a record, whether it is a formal note of the meeting or possibly a follow-up email from one of the parties… inviting comment on the topics discussed,” he said.
Ian Colvin, partner and head of public sector benefits consulting at Hymans Robertson, noted that schemes can often get “caught in the middle” of members and employers, who ultimately make the final decision on awarding ill-health enhancements and benefits.
“Face-to-face meetings can help,” he said. “It is often an emotionally heightened time.”
Last year, the LGPS board’s administration and communication subcommittee proposed to change the formal process for awarding ill-health benefits.
Colvin said the plans, which would remove decision-making on ill-health enhancements from the remit of the employer and put it under the charge of the pension scheme, would be welcomed by practitioners and members.
