Reckitt Benckiser Pension Fund · CAS-39552-Y8B2

CAS-39552-Y8B2

Ombudsman’s Determination Applicant Mr H

Scheme Reckitt Benckiser Pension Fund (the Scheme)

Respondents Reckitt Benckiser Health Care UK Ltd (the Employer)

Trustees of the Reckitt Benckiser Pension Fund (the Trustees)

Outcome 1. Mr H’s complaint against the Trustees is not upheld.

Complaint summary

1 CAS-39552-Y8B2 Background information, including submissions from the parties 4. The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were many other exchanges of information between all the parties.

5. The Scheme was originally established on a Defined Benefit basis. It was governed by a Definitive Trust Deed and Rules (the Definitive Deed) dated 16 September 2008. On 6 April 2007, the DB Section had been closed to new entrants and a new DC section was introduced.

8. Reckitt Benckiser Group plc (RBG) is the principal employer in relation to the Scheme. The Employer is a member of the RBG Group. For ease of understanding I have referred to both as the Employer.

9. Mr H was born in 1973. He was employed by the Employer as a Packaging Technologist from 24 October 1995 to 11 June 2018, when he was made redundant. He became a member of the Scheme on 15 August 1997. His Normal Retirement Age (NRA) is 65.

10. Mr H is disabled. In 2013, he was diagnosed as suffering from Cataplexy, defined as “a chronic neurological disorder that leads to loss of muscle control leading to collapse if the individual experiences a sudden change of emotion” and Narcolepsy.

11. On 11 July 2016, Mr H visited Occupational Health (OH). A report produced by OH said that Mr H was fit to undertake his normal duties. It said his condition was long- term and consideration might be given to an annual OH review assessment. It did not appear at the current time that he needed any workplace modifications or adjustments. It might, however, be sensible for a management led stress risk assessment to be undertaken.

12. There is no evidence that the Employer took steps to follow through with this.

13. On 9 August 2017, the Employer wrote to Mr H and other members of the Scheme to announce that it was consulting with affected employees on the potential closure of the DB Section and moving to a DC basis. The information was posted to Mr H’s home address.

2 CAS-39552-Y8B2 14. The Employer enclosed an Information Pack and urged Mr H to attend a pension clinic to discuss how the changes would affect him. Included in the Information Pack was a section entitled “Frequently Asked Questions” (FAQ).

15. The Information Pack included a Benefit Illustration (the Illustration) showing what Mr H’s pension might be at retirement with and without the proposed changes. The Illustration was based on a number of assumptions, including salary growth and investment return on the DC fund.

16. The Illustration showed that if the changes did not go ahead, the notional value of Mr H’s DB pension to the assumed date of closure was £14,017 p.a. and the estimated value of his pension at NRA if he remained in service was £39,448 p.a. He was also entitled to benefits from Additional Voluntary Contributions (AVCs) that he had paid. The value of these was £110,974 at 5 April 2017.

17. If the changes did go ahead the Illustration showed that the DB pension to the assumed date of closure would increase with revaluation to £29,140 p.a. at NRA. In addition the estimated DC pension was £3,217 p.a. Again, Mr H was also entitled to benefits from the AVCs that he had paid.

18. The Illustration included the following ‘Important Notes’:

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- Unfair dismissal – claiming the dismissal was not a genuine redundancy or, if it was, that there was not a proper process and he was not properly considered for alternative work; and

- Disability discrimination – the practice of requiring a certain standard of performance that put him at a substantial disadvantage due to his disability; failure to make reasonable adjustments for example to fire alarm evacuations and related disciplinary measures; harassment, unfair selection for redundancy based on reaching a certain standard of performance.

44. After the Tribunal hearing, all claims of discrimination were dismissed. Mr H was successful in his unfair dismissal claim regarding the redundancy procedure. However, the Tribunal found that it was certain that Mr H would have been made 6 CAS-39552-Y8B2 redundant even if a proper process had been followed. He received no award from the Tribunal as he had received a redundancy payment which exceeded the statutory requirements.

“18.1 Early Retirement

(A) Rule 18 applies to a Deferred Member who:

…

(iii) at any age is, in the opinion of the Trustees, suffering from incapacity and satisfies the ill-health condition (within the meaning of paragraph 1 (ill-health condition) of Schedule 28 to the [Finance Act] 2004”

(B) Subject to sub-rule (D) the Deferred Member may, with the consent of the Trustees, elect to retire under the DB Section before his Normal Retirement Date. If so, the Trustees must:

(A) in respect of any period of Pre-2018 Pensionable Service, pay the Deferred Member a pension for life starting on the day next following that upon which he retires, of the amount calculated in accordance with sub-rule (C); and

(B) in respect of any period of Post-2017 Pensionable Service use the Employed Member’s 2018 Fund upon the Deferred Member’s retirement under the DB Section to provide benefits …

(C) The pension payable in respect of Pre 2018 Pensionable Service will be equal to the deferred pension to which the Employed Member became entitled on leaving service in accordance with Rule 15.2 (Deferred pension) increased in accordance with Rule 21.1 (Increases to deferred pensions) and then reduced by such amount as the Trustees determine and the Actuarial Adviser certifies as reasonable… 7 CAS-39552-Y8B2

“Having given the matter due consideration and following the receipt of legal advice (including regarding the position under the Trust Deed and Rules of the Fund), the Trustees have agreed to allow a commencement date of your choice from between 1 May 2019 and 1 April 2020 without the requirement for further medical evidence. This provides you with the greatest possible flexibility regarding the start date of your pension, within the scope of the Trustees' powers. This is subject to the completion of all the paperwork to enable the pension to be put into payment, which must be received by the Trustees within two months of the date of this letter (13 April 2020).

If you do not complete all of the necessary paperwork before 13 April 2020, the Trustees will consider that you have withdrawn your current application for ill health early retirement. This means that you will not be able to take your pension commencing from a date in the period specified in this letter.

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69. The Employer should have discussed the GIPP with him as at that time he was not formally redundant, was still within the consultation process and was still employed. The Employer should have provided him with the full options open to him. He says there was little to no information published by the Employer or made available to employees about the ill health early retirement system or how it worked.

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Adjudicator’s Opinion 74. Mr H’s complaint was considered by one of our Adjudicators who concluded that no further action was required by the Employer but that the Trustees should arrange for backdated instalments of Mr H’s IHRP, from 2 May 2019 to 29 August 2019, to be paid to him together with interest. The Adjudicator’s findings are summarised in paragraphs 75 to 128 below.

75. There was no dispute as to the basic facts of the case. On 9 August 2017, the Employer wrote to Mr H to announce that it was consulting with affected employees on the potential closure of the DB Section effective from 31 December 2017. In September 2017, Mr H went on long term sick leave and, while he was absent, the DB Section was closed to future accrual and a new DC arrangement established in its place. Subsequently, Mr H’s role was made redundant and he later applied for an IHRP.

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129. The Employer accepted the Adjudicator’s Opinion, whereas the Trustees and Mr H did not and the complaint was passed to me to consider. The Trustees and Mr H provided their further comments which I have considered in paragraphs 163 to 216 below.

130. Mr H’s comments were extensive and is one of the key reasons for the length of this Determination. Given the size of his response, I set out only the key grounds below. I have however considered all the issues raised in Mr H’s original complaint and his submission following the Adjudicator’s Opinion.

Mr H’s additional points

131. He strongly disputes that employment matters are out of the PO’s jurisdiction. He considers it is a consequence of the termination of his employment that has caused the situation with his pension and therefore this must be considered.

132. He had raised a grievance about the way he was treated at work. Part of the grievance related to his pension. The Employer, without informing the employees, had introduced a scheme that froze an individual’s salary, without the employee being made aware in advance. Not only did this supress his salary but it also had a significant impact on his pension as without any annual pay rise the predictions of his pension would be substantially lower at retirement.

133. His role had allowed him to maintain his position because the Employer had created a specific role that could accommodate his health condition. He subsequently found out that it was unlikely that he would find a similar role in any other organisation because of the restrictions brought about due to his health.

134. He argues that if the DB Section had remained open he would not have suffered penalty deductions on health grounds. Even though the Scheme had closed, because he has had to retire due to ill health he believes that rule should still apply. If he had been able to join the GIPP he would not be taking his pension early and therefore he would not have had penalties applied.

135. The rules of the DC Section and the new GIPP should have been explained to him. To say the GIPP did not apply to him is incorrect; he was an employee and he had been transferred to the DC Section.

136. The GIPP terms stated that an employee needed to be actively in work for six months to be covered. It then said that for those absent before the six-month period 21 CAS-39552-Y8B2 temporary protection could be granted. He was not told about this; that should have been in place and offered to him. Instead, he was told that he would get no further pay, and that he should take redundancy.

137. The Employer sent another copy of the exclusions, dated 18 March 2018, which included a new exclusion stating that the temporary cover was not available to anyone already absent at the time of the transfer. Therefore, this was only implemented after employees had been moved over to the DC Section and after the redundancy consultation period had started. He could understand if this information had mistakenly been overlooked for somebody in good health, but for someone in his situation this was critical information.

138. He believes that the Employer should have advised him of other options regarding his AVCs. If he had not taken the full tax-free cash allowance then he should have been entitled to withdraw the AVCs and invest them in other ways, thereby allowing him to access his money rather than have it tied up.

139. He had paid £190,000 in AVCs, so the £70,000 excess above his tax-free lump sum is being used to pay him an increased pension, but this would only be about £800 p.a. The Employer said this was calculated from a formula used for the DB Section. If he were to die after five years then the remainder of his fund would be lost. If he had known this he would not have chosen to invest this amount into AVCs.

140. The retirement illustration dated 1 September 2021 was the first time he had been given the option to transfer out of the Scheme. This illustration quoted a total cash equivalent transfer value (CETV) of £1,015,412.12. The Employer had previously told him his pension was only worth £12,000 p.a. If the CETV had been offered to him at the time it would have confirmed his understanding that his pension was worth significantly more than he was being told.

141. The option to transfer out and the CETV should have been provided long before the final financial figures were presented to him. Instead he was continually told that his only option was to take his pension. Had he known about the CETV, he could have avoided the Tribunal, taken the £200,000 settlement he had been offered, followed by the 25% tax free lump sum even if it meant waiting for this until he was aged 55.

142. The Employer paid for an independent financial adviser whose recommendation was to take the pension as this was a secure income, albeit at a low value, although by now it had increased in value to £16,850 p.a. However, he says that when he showed the illustration to his own financial advisor he was told the transfer out was the better option.

143. During his membership of the DB Section he received an annual pension statement. He is aware that these are a forecast, however these forecasts must have been based on reliable information and therefore he would assume that although there are no guarantees it was reasonable to expect the value would be there or there about.

22 CAS-39552-Y8B2 144. The benefit statements he was given did not say they were an illustration; this was a caveat that only started to be added in the last couple of months before the DB Section was closed. The DB figures were fixed, based on salary and years of service. He did not expect them to diminish in value like they did.

145. When the DB Section closure pack was sent out he was on holiday for two weeks and then away on business before taking sick leave. HR had told him to put anything work related aside and to focus on getting better. Therefore, he was not in a position to address any concern over the DB Section closure. Employees had been informed in Aug 2017 that consultation for potential closure of the Scheme may occur. It was open to consultation and the document suggested that this change may not happen.

146. By mid-September he went on sick leave and did not return to work. No more information was shared with him and he had no access to the pension literature. A series of workshops was offered to employees but as he was absent he was unable to attend and was not provided with any information from these.

147. While the Employer told him the rules would change for the DB Section, it advised there would be suitable provisions as an alternative for employees requiring ill health cover. He was led to believe the new provisions would be open to him; the Q&A document did not mention any exclusions.

148. As he was absent through ill health during this period, he was not in a position to make informed decisions. The Employer had a duty to inform him of the exclusions to the new pension scheme, particularly if the new rules did not apply to him at the time of the consultation.

149. In the lead up to the Tribunal there had been numerous attempts to agree a financial settlement eventually increasing to £200,000. His solicitor’s advice was he should accept the offer. He considered his pension losses were separate to the Tribunal and therefore he should still have been able to continue to have TPO conduct an investigation into his circumstances. If he had accepted the offer, the Employer stipulated that he must sign a non-disclosure agreement (NDA) which stated that he must withdraw all complaints with TPO. He asked for this condition to be removed from the document, but the Employer refused.

150. He does not understand why the Employer refers to the pension that he has taken early as an IHRP, as he considers there is no advantage in taking it on the grounds of ill health. The literature provided indicates that with acceptance of the IHRP there are no financial penalties for taking the pension early. However, his pension has incurred penalties.

151. When he was first diagnosed with his illness, the Pensions Manager explained that if he became so ill that he could not work he would be entitled to a pension based on his years of completed pensionable service and any years remaining would be added. So the calculation would be based on full working pensionable service.

23 CAS-39552-Y8B2 152. Based on what was known about his condition his situation would have been equally as severe at the start of his absence as at the time of assessment. This would suggest that he did fulfil the criteria for the IHRP before the closure of the DB Section. The OH report said that his condition rendered him unfit for any occupation and therefore his entitlement should have been for an enhanced pension.

153. He initially made an application for IHRP on 1 May 2019 but the Employer said it would only pay from the date of OH approval at the end of August 2019. The Adjudicator had said that his pension should be backdated to the date when he first applied for his IHRP, and arrears paid from 2 May 2019 to 2 August 2019. However, he did not start to draw his pension until 17 March 2021 and he therefore believes the arrears needs to be increased.

The Trustees’ additional points

154. The Adjudicator’s suggested direction regarding redress pre-supposes that Mr H's IHRP was put into payment with effect from 30 August 2019, with the period between 2 May 2019 and 29 August 2019 being a period in which the Adjudicator considered a pension should have been payable and was not. The Trustees argue that no such pension is properly payable in respect of this period, as Mr H did not proceed to take an IHRP as a result of the initial request he made on 1 May 2019. Indeed, he did not retire from the Scheme on grounds of ill-health until 17 March 2021, pursuant to an entirely separate application that he had subsequently made.

155. The Trustees had previously offered Mr H an IHRP commencing from 2 May 2019, which Mr H had refused, choosing instead to defer his retirement to a later date.

156. It is correct that further to Mr H's initial application for an IHRP on 1 May 2019, there was a period of time before the Trustees were able to establish that the conditions for Mr H for being entitled to such a pension were met. The two key conditions were:

(i) receiving the necessary medical evidence to establish the ill-health tests were met; and

(ii) the Trustees determining to award a pension.

These conditions were not met until 29 August 2019 which is why the Trustees’ initial position was that Mr H's IHRP should not commence from a date earlier than 30 August 2019.

157. The Trustees sent a communication to Mr H on 13 February 2020, to confirm the outcome of their decision regarding the commencement of his pension, based on his May 2019 ill health application. The Trustees confirmed that, taking account of previous delays in the process, Mr H could request a commencement date for his IHRP of any time between 1 May 2019 and 1 April 2020. In order to proceed with that application (and it was unclear whether Mr H did wish to proceed with drawing a pension at that time), Mr H was told that he would need to complete the necessary

24 CAS-39552-Y8B2 paperwork to effect the commencement of his pension (and identify his chosen start date) by 13 April 2020 or his application would be treated as withdrawn.

158. Mr H chose not to submit any paperwork to proceed with an IHRP application at that time, and his 2019 application was, therefore, treated as withdrawn.

159. The Adjudicator’s proposed direction is not a remedy Mr H has asked for, nor has he complained about the start date of his pension. Such an order would give rise to an unauthorised payment because it is a requirement of the Finance Act 2004 that a scheme pension be payable for life. It would not therefore be possible, as an authorised payment, for the Trustees to make a payment representing instalments for a period between 2 May 2019 and 29 August 2019, when Mr H's scheme pension did not otherwise commence until 17 March 2021.

160. There is a direct correlation between the amount of IHRP payable to a member and the start date for that pension. The IHRP payable from deferred status is actuarially reduced for early payment. In broad terms, this means that the earlier the start date, the lower the initial rate of pension payable and, therefore, the lower the tax-free cash sum that is available to the member.

161. Regardless of the start date, the actuarial "value" of the total benefits is intended to be the same. An earlier start date does not therefore result in a more valuable benefit for the member. Consequently, a member may have reasons to prefer drawing a pension at a later point, in order that the reduction for early payment is smaller, and to have the ability to take a higher tax-free cash sum.

162. The Trustees do not understand Mr H to be asking for the pension payable pursuant to his 2021 Application to be replaced with the pension that would have been payable had he chosen to take a pension pursuant to his 2019 Application. This would require unwinding a set of payment streams made to Mr H (the benefit payments made pursuant to the 2021 Application), including asking Mr H to re-pay what would have been an overstated tax-free lump sum.

Ombudsman’s decision 163. I sympathise with Mr H and the position he now finds himself in. However, it appears that much of his frustration is as a result of the way in which he feels he has been treated by the Employer, and actually has little to do with his pension complaint.

164. I agree with the Adjudicator that my powers extend only to the consideration of pension complaints. This is explained in Part X of the 1993 Act (the Pensions Ombudsman) (the 1993 Act). Section 146 (1) of the 1993 Act states:

“The Pensions Ombudsman may investigate and determine the following matters—

(a) a complaint made to him by or on behalf of an actual or potential beneficiary of an occupational or personal pension scheme who alleges that he has

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sustained injustice in consequence of maladministration in connection with any act or omission of a person responsible for the management of the scheme… 165. Regardless, section 146(6) of the 1993 Act states:

“The Pensions Ombudsman shall not investigate or determine a complaint or dispute—

(a) if, before the making of the complaint or the reference of the dispute—

(i) proceedings in respect of the matters which would be the subject of the investigation have been begun in any court or employment tribunal…

166. Much of what Mr H has written in his application form to TPO relates either to his redundancy or to the GIPP. In his further submissions he continues to complain about some of the matters which were previously considered by the Tribunal and which I cannot now consider.

167. I acknowledge that Mr H contends that his treatment by the Employer is a direct cause of the situation with his pension. However, I can only investigate and determine disputes with employers if they relate to the occupational pension scheme.

168. In the case of Engineering Training Authority v the Pensions Ombudsman (1996) PLR 409, Carnwath J stated that the PO’s jurisdiction is directed to:

“…the employer’s functions under or “in relation to” the pension scheme in question. It does not give the Ombudsman jurisdiction to investigate complaints about the ordinary contractual relations between the employer and the employee. These are matters for the Industrial Tribunal, or an action in the Court for breach of contract.”

169. Consequently, I cannot consider Mr H’s complaints regarding his dismissal or about disability discrimination in the workplace. In any event, the Tribunal considered whether Mr H was unfairly dismissed and whether there was disability discrimination against him by the Employer. After a contested hearing the Tribunal found that there had been procedural irregularities in relation to Mr H’s redundancy dismissal, but that it was certain that he would nonetheless have been made redundant. Applying Polkey v AE Dayton Services Ltd [1987], there was no loss to Mr H. As he had received a redundancy payment greater than the statutory requirement, no award was made. All other claims were dismissed. It is not for me to comment on that and it is not a factor for me to consider in this Determination.

170. The GIPP is also outside my jurisdiction, and therefore whether its terms are fair or unfair is not a matter on which I can comment.

171. Paragraph 2 above, sets out those elements of Mr H’s complaint which I can consider. I find that much of Mr H’s complaint has been dealt with by the Adjudicator and I do not propose repeating his conclusions here. I have instead focused my 26 CAS-39552-Y8B2 attention on whether the Employer and the Trustees acted correctly and appropriately towards Mr H, in particular focusing on the duty of care owed to him.

172. Dealing firstly with the decision to close the DB Section, Clause 41. Sub-clause 41.1 of the Definitive Deed (see paragraph 7 above) gives the Trustees, with the consent of the Principal Company, the power to amend the provisions of the Definitive Deed. I therefore find that closing the DB Section through the Deed of Amendment, was in accordance with the terms governing the Scheme.

173. I have not considered this aspect of Mr H’s complaint further, but I have looked at how the change to the benefit basis was implemented and communicated.

174. In broad terms, case law confirms that employers are not obliged to advise members about their pension rights, or to highlight potentially detrimental decisions or inform members of how best to exercise their pension rights. The Adjudicator discussed this in his Opinion and I agree with his analysis. I will recap some of the points for ease of reference.

175. As the Adjudicator explained, Scally, concerned a group of doctors who were entitled to buy enhanced pension rights (added years of service) under provisions in a collective agreement. They were not informed of this right, and so failed to take advantage of it. Also, there was a specific time limit in which these new doctors had to elect to buy added years – one year from the beginning of their employment.

176. The House of Lords decided that, in the specific case, it was appropriate to imply a term into the doctors' employment contracts that the employer would take reasonable steps to inform the doctors about their rights. This implied term would only arise if specific conditions were met – broadly that the overall contractual terms had not been negotiated individually or was in a separate document from the employee’s contract; that the right was valuable and that it required some action on the part of the employee to access it; and that the employee could not reasonably be expected to be aware of the particular term unless drawn to the employee’s attention.

177. In Mr H’s case, the right would be the provision for ill-health retirement under the DB Scheme. I consider that Mr H would have been aware of this provision from the documentation sent to him by the Trustees in discharge of their disclosure duties. So, Mr H would be aware of the right – and the focus would be on the time scale under which it was accessible.

178. The Employer argues that no duty under Scally arises because Mr H would not have been able to avail himself of the right. The distinction that the Employer is trying to make is that in Scally the doctors had to take action to access the right and that it was in their power to do so; whereas in Mr H’s situation he had to meet the incapacity criteria, which was a matter of fact. The doctors’ right was ‘actual’ and Mr H’s merely prospective – it could only become an actual right when he met the criteria.

179. In Crossley, the Court of Appeal held there is no implied duty on an employer to take reasonable care of an employee’s economic well-being. The court ruled that the 27 CAS-39552-Y8B2 employer was not in breach of contract for failing to advise an employee that his resignation would have a detrimental effect on his entitlement under a permanent health insurance policy.

180. In Eyett, the employer failed to advise the employee that his chosen retirement date was financially disadvantageous to him, and that, if he chose to retire the following month, his pension would be calculated at a higher rate. The High Court found there was no obligation to tell the employee he was making a mistake, and no breach of the implied term of trust and confidence. It distinguished the situation from that in Scally thus:

“So far as the Scally principle is concerned, the facts of the present case are quite different from those which obtained in Scally. There, the relevant plaintiffs were wholly ignorant of the existence of the valuable right in question and had no means of knowing of its existence unless told of it by their employers. Moreover, I am unable to share the Ombudsman's conclusion that a careful reader of the explanatory booklet which was available to the Complainant would not have been able to deduce from it the consequences, in terms of final pensionable salary, of choosing a date one side or the other of 1 August on which to take early retirement.”

181. In reaching its decision, the court also explained that the member did not ask the university for any advice about his chosen retirement date, and there was no evidence that the university was aware that he was making his decision on the grounds of a mistaken belief. It could therefore not be brought within the remit of the Scally decision. The judge declined to find that the University was in breach of contract – and resisted “the proposition that the implied term of mutual trust and confidence includes within it a positive, obligation to give advice of the kind which is now asserted”.

182. The Employer refers to the Eyett decision in its formal response to TPO (and I think that it is indeed relevant in this situation). As in Eyett, Mr H had been provided with information about the DB Scheme benefits and the future changes. He did not ask the Employer whether he would be better off applying for ill-health before the closure of the DB Scheme. Similarly, there is no evidence that the Employer was aware that Mr H was making any decisions on a mistaken belief about ill-health benefits. In my view, in light of the information provided to Mr H, the situations are analogous.

183. Given that Mr H would likely not have met the criteria from ill-health retirement (according to the available medical evidence and his own intentions to return to work throughout the redundancy process the next year and through his Tribunal case), I consider it would be very unlikely that a court would say that the implied duty of trust and confidence included a duty to advise Mr H that he would be better off applying for ill-health retirement before the DB Scheme closed to future accrual.

184. A Scally duty might have arisen, but in my view was discharged because of the information provided. In the end, the practical outcome is the same. In reading the

28 CAS-39552-Y8B2 judgment in Eyett, I do not consider that the judge addresses the question of whether there would have been a Scally type duty if the information had not been provided.

185. Another way of expressing this would be that in light of the information that had been provided to Mr H and the circumstances that he appears not to have met the criteria for ill-health retirement, applying Eyett, the Employer’s implied duty of trust and confidence did not include a positive duty to advise Mr H that he would be better off applying for ill-health retirement before the DB Scheme closed – not least as it was not clear that Mr H would have met the ill health test and, in any event, was looking to continue working.

186. I have next considered whether due to his circumstances, Mr H could be considered ‘vulnerable’ and thus required special consideration.

187. The medical evidence shows that Mr H suffers with narcolepsy and cataplexy. Attacks can be triggered by stress. In the occupational health report of 18 October 2017, it appears that he was at that time unfit and that the OH Adviser did not envisage his return until his perceptions of how he was treated by management were addressed. However, she indicated that Mr H was fit to attend meetings to discuss these issues.

188. There is nothing in the report that suggests to me that Mr H’s ability to read and understand documents is impaired. It also appears from the formal response that Mr H was an elected staff representative in the consultation process. Again, this indicates to me that there was no evidence of a particular vulnerability or lack of understanding. As I do not see evidence to hold that he was vulnerable, I will not dwell on whether this could have changed the duty to Mr H.

189. Moreover, I find that to some extent whether there was a duty to Mr H or a duty to act more carefully because he was on long-term sick leave is moot. The facts are that he was made redundant and, at that time, was continuing to say that he would be fit to return to work. He was not seeking IHER. Furthermore, all available evidence shows that he would not have qualified for ill-health retirement before the DB Section closed. Therefore, he could not have availed himself of ill-health retirement, regardless of what information he might have been provided with and consequently, he has not incurred a loss.

190. With regard to the accuracy of the information provided, if an employer gives information to employees (whether or not it is under a duty to do so), case law indicates the employer must take reasonable care in giving the information - Hagen and others v ICI Chemicals & Polymers Ltd and others [2002] IRLR 31.

191. In Corsham, the High Court held that the police authority was liable for negligent misstatement where it had informed police officers who were members of the Police Pension Scheme that they would receive a tax-free lump sum, despite knowing about offers to re-employ them straight after retirement. The court held that the police authority, as administrator of the scheme, should have known about the provisions in the Finance Act 2004 regarding the taxation of pensions and the adverse tax 29 CAS-39552-Y8B2 consequences arising where police officers were re-employed into civilian roles within one month of retirement.

192. However, it does not seem to me that Mr H is actually making the case that there was an error in the documents that he received and that he acted in reliance on that misstatement in not applying for ill-health retirement before the DB Scheme closed.

193. Rather, Mr H appears to be more concerned about what he was told about the GIPP. Although the GIPP itself is outside of my jurisdiction, it is possible that an incorrect statement about it may have influenced Mr H’s decisions about ill-health retirement within the Scheme (which would be within my jurisdiction).

194. The statement that a person would receive 60% of basic salary up to age 65 following 6 months continued absence, subject to employer’s consent and insurer’s requirements appears to me to be factually correct. The statement could have gone on to explain what the insurer’s requirements were, including that a member be actively at work for a period before the full cover was applicable, but I do not think that anything in the statement was incorrect. It made clear that the benefit was conditional – employer consent and insurer’s requirements were necessary. I believe that there was sufficient information such that if Mr H were concerned about the change in ill-health provision he could have asked about the insurer’s requirements. He did not do so. Given the discussion on Scally above, there was no implied duty on the Employer to do more.

195. Further, I find there was no material factual misstatement. Even if there was a Scally type duty and it had been breached or a negligent misstatement (and I do not accept either to be the case), any such breach or misstatement would not have caused any loss to Mr H.

196. Mr H considers that his annual benefits statements were incorrect as the pension eventually paid to him was significantly less than he was led to believe.

197. Mr H’s 2017 benefits statement shows that the benefits quoted are based on his service to Normal Retirement Date (at age 65) and that they are “Estimated Retirement Benefits at Age 65”.

198. Moreover, under the heading ‘Further Information’, it says:

“THIS STATEMENT is designed to give an INDICATION of your prospective benefits from the Fund…”

199. Rule 18.1 (B) states that “the Deferred Member may, with the consent of the Trustees, elect to retire under the DB Section before his Normal Retirement Date.” Further, Rule 18.1 (A) states that retirement can be before age 55 if, in the opinion of the Trustees, the member satisfies the ill-health condition.

200. Rule 18.1 (C) states that “The pension payable in respect of Pre-2018 Pensionable Service will be equal to the deferred pension to which the Employed Member became entitled on leaving service…reduced by such amount as the Trustees determine and 30 CAS-39552-Y8B2 the Actuarial Adviser certifies as reasonable having regard to the period (if any) between the start of the pension and the Deferred Member’s 60th birthday…”

201. By the time Mr H claimed his IHRP he was a Deferred Member, having left the Scheme when he was made redundant. His pension was based only on his service accrued to the date he left the Scheme and was reduced by an early retirement factor.

202. At the time he took early retirement, Mr H was aged 47. The benefit he is receiving is therefore potentially payable for 18 years until he reaches NRA, with annual increases and attaching benefits for his dependants.

203. Mr H is also unhappy with what he sees as a poor return on the amount he invested in AVCs. He says that he would not have paid as much as he did, had he known the outcome.

204. Again, the benefit he is receiving is significantly reduced by the fact he is taking it 18 years before his NRA. As for the amount he invested, that was his choice. He has presented no evidence to show that the Employer or the Trustees cajoled or persuaded him in any way to make the contributions he did. It is unfortunate that his circumstances turned out the way they did so that his pension benefits are being paid from a much earlier age than he had anticipated, but that is not the fault of the Employer or the Trustees.

205. In further support of his case, Mr H has compared the benefits he is receiving with the CETV he was quoted. He is unhappy that the CETV was not quoted to him sooner, but there was no requirement on the Trustees to automatically provide details of the CETV. This was only obligatory on request by Mr H.

206. He also believes that the CETV is a far more attractive proposition than the benefits he is receiving. But it appears Mr H may be confusing the ‘value’ of the various quotations he has received. The CETV is an equivalent value of the annual pension figures and contingent benefits. It is a large number and may well seem attractive, but ultimately the ‘value’ is broadly the same as the benefits he is receiving.

207. I accept that Mr H could have taken the CETV and transferred his fund to another provider. It is possible, though by no means certain, that he could then have taken advantage of ‘pension freedoms’ to in due course select a tax-free cash sum and possibly income drawdown. But whether that would represent a better option for him is debatable. As he says, the two financial advisers he consulted had totally different views on this. This reflects the tension between a secure pension guaranteed to be payable for life and a more speculative income that is wholly dependent on future investment returns.

208. Ultimately it was for Mr H to decide, and he took the secure pension option. It is not for me to consider whether that was the correct decision, and only time will tell. But there is no evidence to suggest that Mr H was coerced in any way to making the decision he did by either the Employer or the Trustees. 31 CAS-39552-Y8B2 209. Finally, I have considered whether the Employer discharged its implied duty of good faith in its dealings with Mr H.

210. I believe that there is no argument that Mr H received the Information Pack and enclosures. In summary, my view is:-

• Mr H was provided with adequate information about the ill-health provisions of the DB Section and the changes under the incoming DC Section.

• Applying Eyett, in these circumstances the employer’s implied duty of trust and confidence did not extend to a positive duty to advise Mr H.

• The evidence does not suggest Mr H’s ill-health made him unable to read or understand the information provided and I do not consider it supports a view that he was in this sense vulnerable or that there was any increased duty on the employer.

• I do not find there was any material factual misstatement and therefore there can be no negligent misstatement.

• And even if a Scally type duty had been breached or there had been a negligent misstatement, there was no loss as the available evidence indicates that Mr H would not have qualified for ill-health retirement even if he had applied before 1 January 2018.

211. When the DB Scheme closed to future accrual, Mr H became a deferred member and continued to build up benefits in the DC Scheme. At this point, Mr H was on sick leave but the available evidence from the Occupational Health report in October 2017 suggests that he would not have met the ill-health criteria (it appears the block to returning to work was resolving issues with management and that he was fit to have meetings about this). It appears that Mr H intended to return to work both at the time of closure of the DB Scheme, and throughout the redundancy process and contested tribunal case. His case was that he should have been considered for other positions and therefore believed he was fit to work. The OH report in May 2018 also says that he was fit to return if an appropriate position could be found. This is after the event, but it still supports the view that he was not likely to meet the ill-health criteria in December of 2017.

212. So, even if the Employer had a duty to provide Mr H with more detail about the changes to the scheme or about the GIPP (which I do not agree with), it could have made no difference. Mr H would have had to apply for ill-health retirement before the DB Section closed to future accrual. The evidence indicates that he would not have qualified. On the contrary until his redundancy and through his Tribunal claim, he was arguing that he was fit to work.

213. Therefore, even if there was a Scally duty and it was breached and/or there was a negligent misstatement about the GIPP on which Mr H reasonably relied, there is no loss and no injustice.

32 CAS-39552-Y8B2 214. In light of that I do not need to address questions of whether there was breach of any duty in negligence, whether Mr H relied on the statement, or whether any such reliance was reasonable in the circumstances.

215. Mr H has clearly gone through a difficult time and had some decisions to make which he perhaps now reflects on and wishes he had done something different. But that is not the responsibility of the Employer or the Trustees. I consider that both respondents gave Mr H every opportunity to evaluate his options before making his decisions. In some instances, he changed his mind and missed deadlines as a result, but again I find that is not through any fault of the Employer or the Trustees.

216. I have considered the Adjudicator’s view that Mr H should be offered a pension backdated to 2 May 2019. I agree with the Trustees’ submission that Mr H ultimately retired in May 2021 as a result of a separate, later application for IHER. Therefore, it would be inappropriate to backdate the pension to May 2019 (which relates to an application that Mr H decided not to pursue). In any event, I accept that the pension and lump sum payable from the earlier date would be of a lesser amount. While backdating would result in Mr H receiving an immediate payment of arrears of pension, he would have to repay part of the tax free cash sum he received. Even if Mr H were benefited by this approach in the short-term, I find that it would have financial consequences for him in the longer term, so that overall it would more likely than not cause him a loss. Consequently, for these reasons, I am not prepared to make such a direction.

217. I do not uphold Mr H’s complaint.

Dominic Harris

Pensions Ombudsman 6 January 2025

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