Local Government Pension Scheme · CAS-36970-Y1Z9

CAS-36970-Y1Z9

Ombudsman’s Determination Applicant Mrs Y

Scheme Local Government Pension Scheme (the Scheme)

Respondents Merseyside Pension Fund (MPF) Wirral Council (the Council)

Outcome

Complaint summary

• MPF and the Council held incorrect information relating to her, including an incorrect pension start date and an incorrect history of her worked hours.

• MPF cashed in her additional voluntary contributions (AVCs) without her consent.

• Her benefits were paid late by MPF. She had to wait for over a month before her lump sum was paid and her pension payments commenced.

• There were lengthy delays in completing the Scheme’s Internal Dispute Resolution Procedure (IDRP).

• Her pension records at the Council had been deleted.

• Two communications that MPF sent to her stated her as being dead.

1 CAS-36970-Y1Z9 Background information, including submissions from the parties and timeline of events

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• 1 August 1998 to 31 January 2012 – 30 hours a week worked, 35 hours a week full-time equivalent.

• 1 February 2012 to 31 March 2014 – 30.86 hours a week worked, 36 hours a week full-time equivalent.

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• A number of mistakes were made including her pension start date being incorrectly recorded and there being no recognition that, for a period, she had worked 30.86 hours a week.

• Four years were missing from the service that it had quoted. She had worked for 20 years, not 16.

• Her retirement benefits were paid over a month late.

• She had to repeatedly ask MPF to provide her with a retirement quotation based on the benefits she would have received had she retired at her NPA.

• She had contacted MPF on 24 May 2017 to query her length of service so she must have received the quotation.

• The calculation of her annual pension and the retirement grant both indicated reductions for early retirement.

• Given her role at the school, she would have been aware of there being a cost to the school if these reductions were to be waived. She would also have been aware of the improbability of the school picking up this cost and the need for approval from the head teacher.

4 CAS-36970-Y1Z9 • It would not expect someone in her role to make such an important decision on trust without examining the figures.

• She should have investigated the possibility of the reduction being waived before accepting flexible retirement, not afterwards.

• She rang MPF on 24 May 2017. This was to query her length of service in the Scheme and make sure that it was aware that she had changed her retirement date to 4 September 2017.

• At the time of her making her decision to take flexible retirement, she had more important issues to deal with as her mother was terminally ill.

• She was never consulted on her AVCs. She was just told that they needed to be cashed in.

“I would advise that the Appointed Person is required to determine your appeal within two months of receipt of all relevant information and if for any reason this is not possible I will write to explain the reason for any delay and confirm when the Nominated Person expects to be in a position to make a decision.”

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• Important decisions were made for her without providing any figures. The first flexible retirement figures that she saw were received in October 2017, after she had retired.

• No research had been done as part of the stage one IDRP investigation. In particular, no attempt had been made to request a copy of the recording of her telephone conversation with MPF on 24 May 2017.

• The anomalies in its record of Mrs Y’s worked hours were resolved prior to the payment of her benefits.

• An estimate of Mrs Y’s flexible retirement benefits was provided to her on 11 May 2016. An internal memo dated 24 May 2016 documented that Mrs Y telephoned MPF in response to a flexible retirement estimate with a proposed date of retirement of 11 May 2017 to discuss the service calculation. Its document 6 CAS-36970-Y1Z9 management system did not allow the date of a document to be changed. Also, contents of documents could not be changed. Nor could the document be replaced.

• In relation to Mrs Y not being given the option of purchasing a pension from her AVCs, she could repay the AVC lump sum that she received. It would then arrange for the pension to be paid.

• The incorrect hours used to estimate Mrs Y’s benefits had been rectified and the pension benefits in payment were correct.

• Holding back Mrs Y’s AVC benefits until age 67 was permissible. If she chose this option, then the only choice that would be available to her would be to obtain an annuity from a financial provider outside of the Scheme.

Adjudicator’s Opinion

• The Scheme is governed by regulations. On 1 April 2014, the Scheme changed from being a final salary pension scheme to a career average pension scheme. The Adjudicator noted that the regulations that were relevant to Mrs Y’s pre-April 2014 service were the Local Government Pension Scheme Regulations 1997, SI 1997/1612 (the pre-Regulations). Extracts from the pre-Regulations can be found in the Appendix.

• The sum of Mrs Y’s age and her service at the time that she retired was less than 85 years. As a result of this, her flexible retirement benefits were subject to actuarial reduction. Mrs Y’s employing authority could have determined, on compassionate grounds, that her benefits should not have been reduced. However, the cost of granting unreduced benefits would have been borne by the school where Mrs Y worked. It was not willing to bear this cost.

• Mrs Y stated that her service was incorrectly shown as 16 years rather than 19 years on one of the quotations that she was sent. The Adjudicator took the view that the service being referred to was her service in the final salary section of the Scheme. This started when she joined the Scheme on 1 August 1998 and ended when she switched to the career average section on 1 April 2014. It approximated to 16 years.

• It was noted that there was some uncertainty over whether Mrs Y received a flexible retirement quotation prior to her confirming her retirement and making her benefit choices. In addition, if this quotation was provided, there was some 7 CAS-36970-Y1Z9 inconsistency in the paperwork as to whether this, and a subsequent telephone call that Mrs Y made to MPF, was in May 2016 or May 2017. No transcript or recording was available of the telephone call.

• MPF said that its administration system showed that a flexible retirement quotation was undertaken by the Council on 11 May 2016 based on a retirement date of 11 May 2017. In addition, the note that MPF held in relation to the telephone call from Mrs Y was dated May 2016. The Adjudicator was persuaded that the quotation was produced, and the telephone conversation took place in May 2016.

• On the balance of probabilities, having produced the quotation in May 2016, the Council forwarded it to Mrs Y and the subsequent telephone conversation was as a result of her having reviewed the information provided. The Adjudicator considered it unlikely that Mrs Y would have made such an important decision as electing for flexible retirement without having seen a benefit quotation.

• Mrs Y said that she was misled when considering whether to take flexible retirement. She stated that she was told that it was a win-win option and that she would be no worse off. As she said that these comments were made in verbal conversations, it was not possible for the Adjudicator to validate what was said and the context in which the comments were made. However, no evidence had been seen suggesting that Mrs Y was told that her flexible retirement benefits would not be actuarially reduced.

• The Adjudicator noted that Mrs Y submitted a signed retirement declaration form to MPF on 3 October 2016 which confirmed the flexible retirement options that she wanted to receive. The declaration stated that: “I understand that my decision is final and cannot be changed”.

• Furthermore, it was noted that, on 11 October 2016, Mrs Y sent MPF a further copy of the retirement declaration form. On 21 July 2017, she telephoned MPF to confirm that the form that she had previously submitted was still valid for her revised retirement date. It was acknowledged that this was a difficult time for Mrs Y. However, in the Adjudicator’s opinion, she had a number of opportunities over an extended period of time to request that MPF provide her with a flexible retirement quotation, if she did not have one, and to clarify the benefits she would receive. It was her choice not to do this.

• The Adjudicator took the view that MPF was not at fault. Mrs Y provided it with clear instructions in relation to her intention to take flexible retirement and the benefits that she wished to receive. If she did so without being fully aware of the implications of that decision, that was not MPF’s responsibility. The Adjudicator was of the opinion that this part of Mrs Y’s complaint should not be upheld.

• Consideration was given to the other points raised by Mrs Y in her complaint. She had said that MPF and the Council held incorrect information relating to her,

8 CAS-36970-Y1Z9 including an incorrect pension start date and an incorrect history of her worked hours. The Adjudicator noted that there was some initial confusion in relation to Mrs Y’s retirement date which was originally stated as being 4 July 2017 on the Notification that was submitted on 20 July 2017. On the next day, the Council confirmed that this had been corrected to be 4 September 2017.

• In relation to Mrs Y’s worked hours, these were incorrectly stated on a notification of appointment form and some benefit statements as being 25 hours a week. However, the Adjudicator noted that a correction was made in February 2006. Mrs Y also queried, on 25 October 2017, why hours of 14 appeared on the Council’s summary of her worked hours. However, the Adjudicator took the view that this was a misreading of the document that the Council had provided, with the 14 referring to 2014.

• It was noted that the critical period was from 1 August 1998, when Mrs Y joined the Scheme, to 31 March 2014, her last day in the final salary section of the Scheme. This was the period when Mrs Y’s worked hours had a relevance to the calculation of her benefits.

• From the evidence available, the Adjudicator took the view that the worked hours figures used in the calculation of Mrs Y’s benefits were correct. These were:-

o 1 August 1998 to 31 January 2012 – 30 hours a week worked, 35 hours a week full-time equivalent.

o 1 February 2012 to 31 March 2014 – 30.86 hours a week worked, 36 hours a week full-time equivalent.

• The Adjudicator noted that the change in hours made on 1 February 2012 was part of a rationalisation exercise and was designed to have no impact on Mrs Y’s benefits. The ratio of worked hours to the full-time equivalent hours before the change was 30:35 and after the change was 30.86:36. These both equated to 0.857.

• Mrs Y said that MPF cashed in her AVCs without her consent. It was noted that, on 3 October 2016, Mrs Y submitted a retirement declaration form to MPF. On the form she indicated that she wished to receive the maximum possible tax-free lump sum. This form did not distinguish between Mrs Y’s main Scheme benefits and her AVCs. The Adjudicator was of the opinion that there should have been more communication from MPF in relation to the options available in relation to her AVCs before it paid them to her as a lump sum.

• However, it was noted that MPF had given Mrs Y the option to repay the AVC lump sum that she received should she have wished to use the AVCs in a different way. The Adjudicator took the view that this was a reasonable offer. It gave Mrs Y the option to put herself in the position she would have been in had her AVC benefits not been settled without her consent.

9 CAS-36970-Y1Z9 • Mrs Y said that her benefits were paid late by MPF. Her retirement date was 4 September 2017, and she received her first benefit payment in October 2017. While there was some delay, the Adjudicator was of the opinion that this was not excessive.

• In relation to the IDRP, it was noted that stage one was completed within a reasonable timescale. Stage one was triggered by Mrs Y’s letter of 8 February 2018 and an undated letter. The Council provided its response on 22 February 2018. The Adjudicator noted that Mrs Y was asked by the Council to provide more information in relation to her complaint on 21 February 2018. However, it did not wait for her to respond before providing its stage one response on the next day.

• Mrs Y said that the elected IDRP stage one officer was not independent as he worked for the Council as a tax officer. The Adjudicator said that it was not unusual for those providing IDRP responses to be employees of the organisation that the complaint was being made against. In this instance, the regulations that govern the Scheme stipulate that the employer is responsible for undertaking the stage one investigation. The Adjudicator was of the Opinion that this was not an area for concern.

• The Adjudicator noted that stage two of the IDRP was triggered by Mrs Y’s communication of 14 March 2018. She then provided some further information on her complaint on 10 May 2018. MPF did not communicate the stage two results until 2 April 2019. On 20 June 2018 and 13 September 2018, MPF wrote to Mrs Y to apologise for the delay which it stated as being due to extenuating circumstances. It did not provide a revised target date for completion of the review, as it had promised in its letter of 23 March 2018.

• The Adjudicator was of the opinion that the delay in providing the stage two IDRP response was excessive and inadequate communication had taken place as Mrs Y was not provided with any revised timescales.

• Mrs Y said that her pension records at the Council had been deleted. The Council confirmed that this was not the case. However, it was noted that it was not able to provide confirmation of how and when the flexible retirement quotation that it produced was sent to Mrs Y. So, in the opinion of the Adjudicator, some information was missing from the Council’s file.

• Mrs Y said that two communications that she was sent by MPF in relation to her divorce stated her date of death. MPF had confirmed that these death statements should not have been sent to her and it apologised for its error. The Adjudicator took the view that this would have caused some distress to Mrs Y.

• The Adjudicator was of the opinion that none of these additional points had resulted in a financial loss for Mrs Y. He also considered whether MPF or the Council caused her a non-financial loss, such as distress and inconvenience.

10 CAS-36970-Y1Z9 • The Adjudicator took the view that the delay in completing stage two of the IDRP and the inappropriate divorce statements amounted to maladministration. However, he was not persuaded that Mrs Y was caused distress and inconvenience, sufficient to warrant an award for redress in this instance. MPF had apologised to Mrs Y and, in the Adjudicator’s view, this was consistent with what the Ombudsman would direct in the circumstances.

Mrs Y provided her further comments which do not change the outcome. She said:-

• The pensions liaison officer was unable to detail how the flexible retirement quotation had been sent to her in May 2016. This was an indication that it had not been sent.

• She would have had no reason to try to reverse the payment of her benefits had she seen a flexible retirement quotation before they were put into payment. She never saw a quotation before her benefits were put into payment.

• Her telephone call to MPF on 24 May 2016 was to discuss a change in her retirement date from May 2017 to September 2017 and to discuss her years of service.

• The retirement declaration form was signed without knowledge of any actuarial reduction. She had previously been told that this would be satisfactory to all parties with no losses to her. When signing the form, she was only agreeing to take the full lump sum. No pension figures were quoted.

• She has seen a M37 form dated 11 May 2016 based on a retirement date of 11 May 2017. This form was used to quote the cost to the employer of a flexible retirement application. It showed zero cost.

• No contract or letter of acceptance was issued or signed in relation to her flexible retirement.

• She has the full backing of her head teacher in attempting to reverse the payment of her benefits. The Council and MPF could have been more supportive in looking for a solution.

• She has suffered a financial loss having been mis-sold her pension. She did not need to take retirement when she did. She could have retired in September 2021 without actuarial reduction to her pension. MPF should have agreed to reverse her retirement.

• The fact that her original working hours were recorded incorrectly as 25 hours a week meant that incorrect contributions had been paid. She has seen no evidence that this has been corrected.

11 CAS-36970-Y1Z9 • It was unclear to her how her HR record was correct at the time of the calculation of her benefits when she had raised further issues in August 2019 with the Council. It had an incorrect date recorded for a change in the number of weeks she worked each year. In addition, there were errors in her worked hours history.

• She was never allowed a fair appeal. The IDRP officer did not act professionally and was influenced by the pension liaison officer.

• She is disappointed that the Adjudicator did not consider the stress that she has suffered as worthy of compensation.

I note the additional points raised by Mrs Y, but I agree with the Adjudicator’s Opinion.

Ombudsman’s decision

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Anthony Arter

Pensions Ombudsman 28 September 2021

14 CAS-36970-Y1Z9 Appendix Extracts from the pre-Regulations

“Other early leavers: deferred retirement benefits and elections for early payment

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(3) If the member elects, he is entitled to a pension and retirement grant payable immediately.

(4) If the sum -

(a) of the member's age in whole years on the date his local government employment ends or the date he elects, if later,

(b) of his total membership in whole years, and

(c) in a case where he elects after his local government employment ends, of the period beginning with the end of that employment and ending with the date he elects,

is less than 85 years, his retirement pension and grant must be reduced by the amounts shown as appropriate in guidance issued by the Government Actuary (but see paragraphs (5) and (6) and regulation 36(5) (GMPs)).

(5) A member's appropriate employing authority may determine on compassionate grounds that his retirement pension and grant should not be reduced under paragraph (4).”

“Length of period of membership: calculation of benefit

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(3) Membership in part-time service is counted as the appropriate fraction of the duration of membership.

(4) The numerator of that fraction is the number of contractual hours during the part-time service and its denominator is the number of contractual hours of that employment if it were on a whole-time basis.”

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