Principal Civil Service Pension Scheme · CAS-35685-R6X1

CAS-35685-R6X1

Ombudsman’s Determination Applicant Dr N

Scheme Principal Civil Service Pension Scheme (the Scheme)

Respondents The Cabinet Office MyCSP

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events

1 CAS-35685-R6X1 “I can confirm that the option you made to buy 6 years 000 days that commenced from 30 July 2004 is now cancelled. The date of the last contribution is 31/07/2005 […] The number of added years you will be credited with in respect of the cancelled option, inclusive of the last contribution is 0 years 122 days.”

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• MyCSP’s maladministration had resulted in a loss of expectation that had long lasting consequences for him and his family.

• The estimate provided, just before his retirement, was consistent with earlier estimates. It formed the foundation of his decision to proceed with his retirement. MyCSP missed an opportunity to correct the figures. It missed a further opportunity when he formally requested retirement through his employer.

• It was not until his employment had ended that he was advised of the error, which resulted in a reduction of £3,384.34 in his annual pension. MyCSP should have been able to detect that a significant error had been made in the calculations before he retired.

4 CAS-35685-R6X1 • He should be paid the benefits that were quoted to him on 24 April 2018.

• After he submitted his application to draw his benefits, MyCSP made several errors, and delayed the retirement process, which had caused him significant distress and inconvenience.

• The reduction in his pension from the Scheme meant that his household income was below the level that he and his wife had expected. Their in-depth retirement planning, and the decision they made to leave their jobs, were based on the information MyCSP had provided.

• They would have accepted the option of remaining in work, and bought more pension benefits from the Scheme, had they known the correct figures.

• He telephoned MyCSP concerning the Contract. He advised that he was no longer making payments through his pay and asked it to check the accrual rate. He was told that everything was in order.

• In August 2005, the APAC would have been responsible for amending his pension record to reflect the cancelation of the Contract.

• The ARR estimate, dated 27 August 2014, quoted added years of three years and 247 days. The ARR estimate, that was issued on 2 October 2017, quoted four 5 CAS-35685-R6X1 years and 325 days. It was clear from the figures that Dr N was continuing to accrue added years. The APAC had not amended his record correctly. As a result, the records it had inherited were incorrect.

• Dr N had said that he had asked it to check his record during a telephone call. It could not locate a record of the call. So, it could not comment on this aspect of his complaint.

• It upheld Dr N’s complaint relating to the APAC’s failure to update his record. However, it was reasonable to consider that he would have questioned the increase in his added years.

• In relation to his complaint concerning the level of service he had received from MyCSP, it noted that, on 9 May 2018, it had asked for a screenshot of a calculation that it already held. It also noted that it had failed to respond to Dr N’s outstanding questions until 21 May 2018, despite receiving further follow up emails and telephone calls from Dr N. It acknowledged that he had been provided with conflicting advice in respect of the payee when he was buying out the ARR reduction. It also upheld this part of his complaint.

• It acknowledged that, at the time of receiving the corrected figures, Dr N’s retirement date had passed. He was unable to make any amendments to his retirement planning, either through the purchase of additional benefits or by withdrawing his retirement.

• It acknowledged that it had not provided Dr N with an acceptable level of service. It made several errors, and its communications were poor.

• It accepted that it would have been Dr N’s intent to purchase additional pension benefits had he been aware of the error prior to his retirement. However, it said that this did not result in an entitlement to the higher benefits as he had requested. This part of his complaint was not upheld.

• It offered Dr N £500 for the distress and inconvenience he had suffered.

“When look at if Partial Retirement would be an option, we would need Scheme Manager Approval if it was to be backdated. [Dr N] would also need to take into account his working pattern, and especially abatement. However this would mean that more than likely the member would not have to repay

6 CAS-35685-R6X1 anything (unless he is subject to abatement and sticks to 100% of his pension being paid).

The easiest way administratively would be to cancel his award altogether, as this would not need Senior Manager approval. However the member would need to repay everything that he has been paid from the scheme, i.e. all pension payment and pension lump sums.”

• He and his wife had decided to consider retirement for two reasons: concerns over their family health history and the fact that he was under investigation for a heart condition. There were several activities they wished to undertake in retirement; they needed to be fit and spend significant time away from their home.

• They had planned their retirement in detail, over a two-year period, with the help of an independent financial adviser.

• Due to maladministration by MyCSP, he had suffered a loss of £3,384.34 per annum in expected pension. This had led to long term hardship and had negated the planning that they had undertaken. They were not given the opportunity to recover from its errors in a timely manner.

• Furthermore, the maladministration had resulted in him having to make some irreversible decisions with other pension providers and his wife’s NHS career and pension had been adversely impacted.

• The stage one IDRP decision did not recognise the serious consequences of the errors made by MyCSP. The ex-gratia payment was insignificant in view of the extent of the maladministration and the potential implications.

• In addition, the stage one IDRP response did not recognise the opportunities missed by MyCSP to rectify the errors at an earlier stage. It had attempted to deflect blame on the previous administrators and apportion some blame to him. It had failed to mention his numerous communications with MyCSP and did not

7 CAS-35685-R6X1 maintain accurate records: it was unable to find any record of the telephone conversation during which he queried the added years accrual.

• MyCSP’s document “What to expect when you claim your Civil Service pension” indicated that it would check the information supplied by his employer. It also indicated that making sure all the information was correct and preparing the pension option could take two months. He had every reason to expect that the ARR estimate dated 25 March 2018 was checked and correct.

• It was unreasonable to expect the liability for MyCSP’s negligence to rest with him, particularly given the fact that it was too late for him to mitigate his financial position.

• MyCSP’s customer service, timeliness of response, and communications fell short of his expectations. He had to contact the Financial Director of the Cabinet Office to get his refund of the overpaid buy-out cost.

• He and his wife had pursued the option of re-employment with their previous employers. His wife secured several short-term contracts with the NHS but they ended in March 2019. He asked that his resignation from the MOD be withdrawn. This was initially declined. He also applied for work elsewhere.

• The reinstatement of his employment was a long process which did not conclude until 27 November 2018.

• MyCSP was asked for details of his benefit options following the MOD’s offer to reinstate his employment. It was slow to respond. One of the options that was presented to him would have required him to pay back the pension he had received. This took no account of the fact that he would have been without income for approximately six months. So, he had no choice but to return to the MOD’s employment on a parttime basis.

• He was put in the wrong section of the pension scheme following his reinstatement.

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• The retirement process did not go “smoothly” in his case. However, it could not pay benefits above what was provided for in the regulations that governed the Scheme (the Regulations).

• Dr N had not suffered a loss, as he could not lose something to which he was not entitled.

• The underlying principle of redress was to put someone in the position they should have been but for the mistake.

• It was difficult to conclude that Dr N was not in a position to know that the figures he had been quoted were wrong. He had not reasonably relied on the misstatement.

The Cabinet Office subsequently confirmed that, due to the length of the break in Dr N’s service, he had automatically been placed in the Nuvos section of the Scheme when he re-joined. However, he had now been entered in the Classic section of the Scheme.

Summary of Dr N’s position

• Had his request to have his employment reinstated not been refused in the first instance, he would have paid back the pension he had received. He was not given the option of reinstatement until several months later. At which point, paying back his pension would have left him with no income during the intervening period.

9 CAS-35685-R6X1 • All the options that were eventually presented to him would have resulted in further financial loss. So, he elected to continue drawing his pension and return to work on a part time basis; he considered this to be the only viable option.

• He was aware that he could not be paid pension to which he was not entitled.

• He will suffer a financial loss over his lifetime, which he estimated to be £125,000.

• The Cabinet Office’s stage two IDRP response had focused on the fact that he should have known that a mistake had been made. He did query the position with MyCSP at the time.

• MyCSP should have proactively managed the refund of the overpaid buy-out cost; the overpayment arose because of an error of the part of MyCSP.

• The £500 payment made by MyCSP did not reflect the consequences of its errors.

The Pensions Ombudsman’s position on the provision of incorrect information

Adjudicator’s Opinion

10 CAS-35685-R6X1 • MyCSP had agreed that it sent incorrect information to Dr N in several ARR estimates and also in a benefit statement. The most critical of these were the ARR estimates that it issued on 25 March 2018 and 24 April 2018, close to Dr N’s retirement date. So, there was no dispute that Dr N had been disadvantaged as a result of the error made.

• The provision of incorrect information amounted to maladministration. As maladministration had occurred, the normal course of action would have been, as far as possible, to put Dr N back into the position he would have been in had the error not occurred. This did not, however, mean paying Dr N a level of benefit to which he was not entitled. Dr N needed to show that he relied on the incorrect information to his detriment and that it was reasonable for him to do so.

• In August 2005, Dr N notified the previous administrators that he wished to cease payments to the Contract. At that point in time, the number of added years that he had purchased was frozen at 122 days. Dr N was notified of this in the APAC’s letter of 23 August 2005.

• The subsequent incorrect record was caused by Dr N’s request not being processed correctly, and his added years continued to increase despite the fact that he was paying no further contributions. Between August 2014 and April 2018, Dr N received at least five separate communications from MyCSP which quoted the added years purchased and showed that this figure was increasing. So, in the Adjudicator’s opinion, it was not unreasonable to conclude that Dr N should have been aware that something was amiss.

• Dr N maintained that he telephoned MyCSP concerning the Contract, and informed MyCSP that he was no longer paying contributions. He also maintained that he had asked MyCSP to check the accrual; MyCSP confirmed at the time that everything was in order. The Adjudicator noted that it was unable to find a record of this telephone conversation.

• Without a record of this telephone conversation, the Adjudicator could not say that, on the balance of probabilities, it took place. If it did take place, the Adjudicator was unable to comment on the context in which MyCSP confirmed that there were no issues. The Adjudicator noted that Dr N said that he had concerns at the time and that he said that he did raise these. However, the Adjudicator took the view that it was not reasonable for Dr N to have relied on the information, in the ARR estimates provided by MyCSP, as the basis for his initial decision to retire.

• Dr N maintained that, had he been provided with the correct figures before his retirement, he would have deferred his decision to retire on 31 May 2018 and continued working.

• However, the Adjudicator noted that the option of cancelling his retirement, and returning to fulltime employment, was available to Dr N, but he chose not to

11 CAS-35685-R6X1 accept it. The option he selected was to accept partial retirement and parttime employment with his retirement benefits paid at the full rate.

• The option of Dr N returning to work was initially declined by the MOD. It was not until 27 November 2018, that he returned to the MOD’s employment. The Adjudicator appreciated that Dr N had to consider the financial impact of the six- month gap in his employment. As a result of these considerations, the Adjudicator noted that other options were more attractive to Dr N than cancelling his retirement and returning to fulltime employment.

• However, in the Adjudicator’s opinion, the decision that Dr N had made to retire was not irreversible. He was of the opinion that MyCSP was correct in granting Dr N the benefits that he was entitled to under the Regulations.

• This situation had caused Dr N distress and inconvenience. The Adjudicator said this because Dr N had requested ARR estimates to assist him with his retirement planning. So, this was an important time for him. On five separate occasions, over a period of four years, MyCSP sent Dr N incorrect information concerning his benefits. The error in the calculation of his benefits was not corrected until after his retirement. At this point he decided, for financial reasons, to return to work on a parttime basis.

• Furthermore, MyCSP had acknowledged that it was slow to respond to several of the questions Dr N raised with it. It had also acknowledged that it provided conflicting information in relation to the payee for the cheque. When it wrote to Dr N with his correct ARR figures, it quoted two different costs for buying out the ARR. A further issue occurred when Dr N was reinstated in the Scheme but was not put in the section of the Scheme that had previously been agreed with him.

• The Adjudicator noted that MyCSP had apologised for these errors and had paid Dr N an ex-gratia payment of £500. In the Adjudicator’s view, and in accordance with my guidelines on non-financial injustice, Dr N had suffered a serious level of distress and inconvenience. So, a total award of £1,000 should be made to Dr N to recognise this.

Dr N did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider.

Dr N provided further comments, which are in summary:-

• His understanding was that the main principles concerning complaints were to put the applicant back in the position they would have been had the error not occurred and for redress to be provided if it could be shown that financial loss or non- financial injustice had flowed from the incorrect information that had been provided.

12 CAS-35685-R6X1 • It seemed that these principles had not been fully taken into account when considering the available evidence. The £1,000 payment did not reflect the level of distress and inconvenience he had suffered which he considers to be severe. Furthermore, this payment would not put him back in the position he would have been had the error not occurred.

• In considering this, the Opinion did not take into account consequential losses flowing from the original mistake. These included the salary and reckonable service he had lost. The available evidence supports a different decision from the Adjudicator’s.

• The Opinion dismissed some key events, circumstances and evidence without an underpinning argument and relied solely on the view that he relied on an incorrect estimate. The Opinion seemed to imply that he should not have relied on any of the information he received from MyCSP.

• He had initially suspected that something was wrong. He made enquiries and received reassurances that the figures were correct. However, he accepts that supporting evidence of this is not available.

• Given the volume of communication he had with MyCSP, he had growing confidence that the quotation he had accepted had been checked for errors. He was not aware of any other information he could have used to make his retirement decision.

• There was evidence that, when the magnitude of the error became apparent, he would have cancelled his retirement and returned to work given the opportunity. There was an opportunity for him to withdraw his resignation at any point up to his employment exit date. Evidence shows that he requested his resignation be withdrawn. However, he was advised by the Cabinet Office in May 2018 that this would only exacerbate matters.

• The Adjudicator’s Opinion suggested that he did not try and actively mitigate the mistakes of others. Evidence shows this was not the case.

• He made a number of suggestions for changes to the wording of the Opinion. These included adjustments to the complaint summary which he considered not to be complete. He also considered that the tone of the background section favoured the respondents.

• What is the difference between an estimate and a quote in the context of this case? Also, what are the implications of a pension quote that had been signed and accepted in terms of normal contract law?

13 CAS-35685-R6X1 • It would not have been financially viable for him to return to work full-time and keep his retirement benefits. This was due to abatement and the fact that the benefits of him having bought out the ARR reduction would have been negated. So, he had little choice but to initially return to work on a parttime basis to avoid adding to his consequential losses.

• After his reinstatement, some further options were informally presented to him by the Cabinet Office. He later had the opportunity to reverse his retirement decision but not without financial impact. He would have had to return all his pension benefits leaving him without income between his accepted retirement date and being reinstated.

• The Cabinet Office had the opportunity to put him back in the position he would have been had the mistakes not occurred. It could have done this by considering his enforced absence from work as special paid leave rather than special unpaid leave. This would have compensated him for his immediate financial losses from reversing his retirement decision and allowed him to accrue reckonable service during this time. As this did not occur, it was not unreasonable for him to conclude at the time that continuing with part-time work gave him the best balance between recovering his financial position and incurring a further loss.

I note the additional points raised by Dr N and accept that he has suffered severe distress and inconvenience as a result of the maladministration. However, I agree with the other aspects of the Adjudicator’s Opinion.

Ombudsman’s decision

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I have noted the suggestions that Dr N has made for the re-wording of paragraphs in the Adjudicator’s Opinion. I have not commented on these as I do not consider that they affect the outcome of this case.

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I partly uphold Dr N’s complaint.

Directions

Anthony Arter

Pensions Ombudsman 10 May 2022

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