Nhs Pension Scheme · CAS-36097-P5H5

CAS-36097-P5H5

Ombudsman’s Determination Applicant Mrs D

Scheme NHS Pension Scheme (the Scheme)

Respondent NHS Business Service Authority (NHS BSA)

Outcome

Complaint summary

Background information, including submissions from the parties

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1 The IFA included a calculation of how scheme pays would affect Mrs D’s benefits at retirement. 2 NHS BSA provided a recording of this telephone call to The Pensions Ombudsman. 2 CAS-36097-P5H5

On 27 March 2019, Mrs D emailed the Deputy Chief Executive Officer of NHS BSA. In summary she said:-

• She was very concerned about the service she had received from NHS BSA.

• In December 2018, she decided to leave the Scheme and completed all the relevant paperwork to ensure that NHS BSA had it in good time for her leaving date in March 2019.

• She was pleased to receive the January 2019 Statement which detailed the lump sum she would get. She read the paperwork thoroughly and understood that the amount might be different when the final calculations were completed. She had clearly checked her employment details and, as they had matched, she naturally assumed that the final figures would be similar.

• When she received the March 2019 Statement, she saw that her lump sum had reduced by £80,000. This reduction was significant and may have made a material difference to her decision to leave the Scheme, which was too late to reverse at that stage.

• She had spoken to her local pension team and was informed that the difference in the figures might have been due to the LTA and scheme pays, both of which would have been available when she was sent the January 2019 Statement.

• She said there was no indication in the January 2019 Statement to suggest the change in the figures would be 25% less than predicted, and asked for an explanation on how the error could have occurred, as it had caused her considerable distress. She had based her planning and leaving assumptions on the January 2019 Statement, being aware that there might be a slight variation to the figures. 3 CAS-36097-P5H5 On 29 March 2019, an NHS BSA technical specialist replied to Mrs D. The technical specialist explained how the LTA affected the tax-free cash that Mrs D could receive. The response did not mention anything regarding scheme pays.

Mrs D retired and started claiming her pension from the Scheme in April 2019.

On 9 May 2019, Mrs D made a complaint through the Scheme’s Internal Dispute Resolution Procedure (IDRP). In summary she said:-

• Since her email of 27 March 2019, an increasingly complicated and unusual set of circumstances that involved multiple errors, system failures and missed opportunities had been revealed in relation to the information the Scheme had recorded for her.

• The primary issue was that scheme pays had not been recorded on her records. So, her pension figures were incorrect. Consequently, she had been disadvantaged and was informed that she had a potential tax charge of £153,000.

• Over the past three years her pension growth had been in excess of £40,000. She had taken the correct action to ensure that scheme pays was applied to her pension.

• HMRC had paid the correct amount to NHS BSA to cover the additional tax charge required under scheme pays, but this was not recorded on her records.

• She believed this position could be quickly resolved because it appeared to be an administrative error. She also had concerns about her pension calculation prior to her retirement date.

• She requested her pension be reopened and her pension figures amended to include the missing scheme pays record for the 2016/17 to 2018/19 tax years.

• Once she received the amended figures, she would be in a position to make a decision about her pension based on the correct information. This might involve reversing her decision to claim her pension from the Scheme.

Mrs D also added:-

• She had received three pay rises in the last four years and was fully aware that she would exceed the annual allowance as a result. She was aware that she needed to use scheme pays to pay the associated tax charges for the tax years 2016/17 to 2018/19 inclusive. In order to understand her position, she sought financial advice from the IFA.3

• She believed her Election Form for the 2016/17 tax year had been misplaced by NHS BSA. Although she believed this to be unusual, she also believed it was highly probable, given the information she had received from HMRC.

3 Mrs D provided a copy of emails between herself and her IFA concerning this issue. 4 CAS-36097-P5H5 • There were missed opportunities, prior to her claiming her pension from the Scheme, to highlight that there was no adjustment for scheme pays on her pension record. Had this been done, it would have allowed her to have completed the Election Forms prior to claiming her benefits from the Scheme and she would not have incurred a tax charge for the tax years 2017/18 and 2018/19.

• She had spoken to NHS BSA between 21 December 2018 and 4 January 2019, where she had asked for further information concerning scheme pays for the 2017/18 tax year. She was told that the previous years’ form covered this period, so she did not need to submit another one.

• In view of the missed opportunities to address the issue of the Election Forms being missing from her Scheme records for the 2017/18 and 2018/19 tax years, she requested that her completed Election Forms for the tax years 2016/17, 2017/18 and 2018/19 be accepted retrospectively. NHS BSA agreeing to do so would reduce the tax charge she had incurred.

Between 14 May 2019 and 7 June 2019, there were further exchanges between Mrs D and NHS BSA concerning scheme pays and the process for Mrs D to apply for it.

On 17 July 2019, NHS BSA replied to Mrs D’s complaint under stage one of the Scheme’s IDRP. It said in summary:-

• It had listened to the telephone call of 4 January 2019 and confirmed that its call handler had confused her annual allowance charge with IP16. In light of this mistake, it would exceptionally accept the scheme pays for the 2017/18 tax year on a voluntary basis. Mrs D would need to complete the Election Form. A reduction to her benefits would be required to recover the total balance owing for scheme pays.

• At the time of the 4 January 2019 telephone call, Mrs D had already missed the deadline for scheme pays for the 2016/17 tax year. NHS BSA could not trace an application for that tax year, and it was unable to accept the election retrospectively, as this was the first occasion Mrs D had queried this issue. The information provided during this telephone call did not deprive Mrs D of using the scheme pays facility, as she had already missed the deadline by the time that telephone call was made. NHS BSA believed that sufficient information was available on its website to confirm that the relevant forms must be submitted if a member wished to opt for scheme pays.

• It understood that Mrs D expected the LTA and scheme pay figures to have been included in the January 2019 Statement. At the time of that Statement, NHS BSA was unaware of her LTA position and retirement date. It was also unaware whether any protection would have been applicable or if Mrs D had crystallised benefits with another pension provider.

• The supporting information supplied with the January 2019 Statement explained that if Mrs D was subject to an annual allowance charge and had elected for this 5 CAS-36097-P5H5 to be paid via scheme pays, no scheme pays deductions had been applied to the estimated pension. The deduction would be applied when she retired.

• Regarding Mrs D’s request for scheme pays for the 2018/19 tax year, it noted that this request was received after her retirement date. NHS BSA explained that when a member retired they signed a declaration confirming they had read the retirement guide (the Guide). The Guide stated: “…any request for Scheme Pays for a tax charge occurring in the same tax year as you reach age 75 or retire must be made before your NHS pension benefits have been put into payment. Any application for Scheme Pays after your benefits have been put into payment will not be accepted and you must pay any annual allowance charge yourself.”

• It did not believe it had put Mrs D at a disadvantage, as information regarding scheme pays for her final year was available in the Guide that she had confirmed she had read when she signed her application for payment of her retirement benefits. As NHS BSA had received Mrs D’s election for scheme pays for the 2018/19 tax year, after her benefits were put into payment, her request for scheme pays for that tax year was correctly denied. Mrs D would need to arrange to pay the annual allowance charge for this tax year herself.

• When NHS BSA paid a member’s annual allowance charge, this amount was recorded as a notional negative defined contribution (DC) account on their pension record. This was similar to NHS BSA loaning a member the money to pay their tax bill, which they must repay with interest when they retired or transferred out. At retirement, the total negative DC account balance owing, including all relevant interest, was converted into a permanent reduction to the member’s Scheme benefits using actuarial factors provided by the Scheme actuary.

• As Mrs D had already retired when she requested scheme pays for the 2018/19 tax year, this request could not be accepted, as she was already in receipt of the benefits from which the repayment would be recovered.

• NHS BSA did not have access to HMRC records. Unless the Election Forms for scheme pays were received by the Scheme, it was not able to implement them. As the forms were not received, Mrs D’s intentions could not be taken into consideration.

• Due to the way NHS BSA processed its post, it was highly unlikely that any forms sent to it could have been misplaced. Post was handled in a secure environment, with each piece of post dealt with in isolation. It was confident that Mrs D’s Election Forms were never received by the Scheme. Once it received an amended Election Form for the 2017/18 tax year, an adjustment to Mrs D’s benefits would be calculated to take this into consideration.

On 11 December 2019, NHS BSA sent a further letter to Mrs D. It said in summary:-

• Although it had received her election for scheme pays after her pension benefits had been put into payment, after considering her case, it had agreed to pay all her 6 CAS-36097-P5H5 annual allowance charges in respect of the years 2016/17 to 2018/19 inclusive, using its voluntary scheme pays facility, on this occasion.

• As it was paying her annual allowance charge using its voluntary scheme pays facility, Mrs D remained solely liable for the charge.

On 15 December 2019, Mrs D made a complaint through the second stage of the Scheme’s IDRP. In summary she said:-

• She was pleased that NHS BSA had agreed to accept her Election Forms for the 2016/17 to the 2018/19 tax years inclusive, and that this issue had been resolved. However, she was now in an unfortunate position of having a significant tax bill associated with the 2016/17 tax year, a potential tax bill for the 2017/18 tax year and significant accountancy fees.

• Over the past nine months she had been trying to get the issue with her scheme pays election resolved and it had taken considerable time and effort. She requested:-

- Reimbursement of the additional accountancy fees of £1,884 she had incurred as a direct result of this issue.

- Partial reimbursement of the tax liability she had incurred as a result of the delay in scheme pays being applied for the 2016/17 tax year.

• She had submitted the Election Form for the 2016/17 tax year in good faith and was not aware that it had not been received. She also did not have any way of knowing that it had not been received by NHS BSA.

• During a telephone call with NHS BSA, she was incorrectly told that her Election Form for the 2016/17 tax year was on file. She believed that NHS BSA should be responsible for a proportion of the tax liability from the point of that telephone call until the tax liability had been paid to HMRC through scheme pays. NHS BSA should also pay any new charges relating to the 2017/18 tax year that she may incur.

• As a direct result of NHS BSA’s maladministration she and her family had suffered unnecessary distress and worry which had impacted on her ability to function both at work and at home.

• She also made the decision to retire and return to work based on incorrect figures, which was a decision she might not have made, had she been provided with correct information.

• She requested compensation for the non-financial injustice she had suffered.

On 20 January 2020, NHS BSA replied to Mrs D’s complaint under stage two of the IDRP. A summary of its response is detailed below in paragraphs 25 to 37.

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Summary of Mrs D’s position

4 Mrs D provided a copy of the letter from HMRC confirming this figure. 9 CAS-36097-P5H5

Adjudicator’s Opinion

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Ombudsman’s decision

I do not dispute the efforts Mrs D made to resolve this issue, and that it would have undoubtedly caused her considerable distress. However, I find that there is no evidence that Mrs D submitted the Election Form in respect of 2016/17, and by the time of the telephone call on 4 January 2019, Mrs D had already missed the deadline for scheme pays for the 2016/17 tax year (see paragraph 21 above).

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Anthony Arter CBE

Deputy Pensions Ombudsman 7 February 2024

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