Royal Mail Statutory Pension Scheme · CAS-78897-G8T0

CAS-78897-G8T0

Ombudsman’s Determination Applicant Mr E

Scheme Royal Mail Statutory Pension Scheme (RMSPS)

Respondents Cabinet Office Capita

Outcome

Complaint summary

Background information, including submissions from the parties

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Capita also enclosed an estimate of retirement benefits with the letter. Each option stated that the figures were actuarially reduced.

On 20 August 2020, Capita sent Mr E a retirement quotation based on him taking early retirement in November 2020. The benefits in the quotation were actuarially reduced because Mr E was claiming his benefits before his NRA.

On 16 September 2020, Mr E returned the retirement option forms to Capita. Mr E:

• opted to take his full pension from the Schemes, with no PCLS;

• signed a declaration which said that he was electing to take a PCLS, but it would not be used to invest as a pension contribution to a registered scheme; and

• requested a transfer pack and completed the form which he was only required to do if he planned to explore the option of transferring his benefits from the Scheme.

On 17 November 2020, Capita informed Mr E that his pension would be paid at an annual rate of £7,206.17.

On 23 and 24 November 2020, Mr E sent Capita an email. He said that he had incorrectly chosen the full pension instead of the reduced pension and PCLS in the option form. Mr E asked for a new form so he could select the correct option.

On 4 December 2020, Mr E emailed Capita again because he had not received a response.

In response, Capita clarified that Mr E would need to explain, in writing, why the Cabinet Office, the RMSPS Manager, should allow him to change his retirement option.

The Cabinet Office has said that on 16 December 2020, Capita received an undated letter from Mr E. In this letter he said that a third party had told him that he ticked the incorrect box. Mr E asked the Cabinet Office to review his request and allow him to take the reduced pension and PCLS.

On 28 January 2021, the Cabinet Office told Capita that it did not approve Mr E’s request because the retirement and transfer options were clearly presented to him. It

2 CAS-78897-G8T0 also said that Mr E had not provided details of any exceptional circumstances that would warrant it allowing him to change the option that he selected. According to the Cabinet Office, Capita notified Mr E of the decision on the same date.

On 11 February 2021, Mr E complained to the Cabinet Office about its decision to not allow him to take a reduced pension and PCLS instead of his full pension.

On 9 March 2021, Capita responded to Mr E’s complaint, which it did not uphold. In summary, it said that the Cabinet Office had reviewed his request and decided not to approve his request to reverse his decision to take a full pension. It said that it had reviewed Mr E’s account, as well as the form that he returned, and decided that the options were made clear to him. So, neither Capita nor the Cabinet Office were at fault. Capita provided Mr E with details of the RMSPS’ Internal Dispute Resolution Procedure (IDRP) if he remained unhappy with the decision.

On 24 March 2021, Mr E made a stage one IDRP complaint. In summary, he said:-

• The purpose of taking the PCLS was so that he could help his daughter with her university fees.

• Capita took two months to acknowledge that it had received his completed options form.

• He contacted Capita immediately after he received the letter which outlined his payment entitlement because it was incorrect.

• As far as he was aware, he had completed the form correctly. He had asked Capita for a copy of the form, but it said that it could only provide screenshots.

• He should have been able to contact someone, through the Royal Mail or Capita to get advice on taking his pension benefits.

• He felt let down by the decision.

On 15 April 2021, Capita provided its stage one IDRP response. It said:-

It had sent Mr E a retirement quotation, for his benefits in the schemes, approximately three months before his 60th birthday.

Mr E opted for a full pension and later got in contact to explain that he had selected the incorrect option.

The Cabinet Office concluded that the options were clearly presented, and Mr E had not provided any exceptional circumstances which may allow him to now change the option he selected.

While acknowledging receipt of his completed retirement options form would have been best practice, there was no legal requirement for it to do so.

3 CAS-78897-G8T0 It was unable to override the Cabinet Office’s decision. Instead, it considered whether the Cabinet Office took the relevant facts into account, asked the correct questions, and reached a decision that any other reasonable decision maker would reach.

There was no legal requirement for it to confirm bank details, retirement options or any other details provided by a member. It would only get in contact if it believed that there was an error in the paperwork or that the instructions were unclear. Neither of these applied in Mr E’s case.

It did not uphold the complaint and agreed with the Cabinet Office’s stance.

On 6 May 2021, Mr E wrote to Capita and said:-

He was unhappy with the decision and its lack of empathy and understanding. Additionally, it had suggested that he was 60 when he was, in fact, 55.

He decided to take a PCLS and reduced pension from the schemes and believed he had completed the forms correctly.

If the forms were not completed correctly, Capita should have queried his request because he had not reached age 60.

He believed that:

o Capita had paid his pension five years earlier than it should have; and

o there were faults on both sides, however, he had not received any financial advice and he believed that Capita should have helped him.

If it could not honour the reduced pension and PCLS, it should reverse his decision to take the pension until his 60th birthday in 2025.

On 22 July 2021, Mr E requested acknowledgement of the letter that he had sent on 6 May 2021. He explained that the error was causing him stress, particularly as he had agreed to use some of the PCLS to help his daughter with her university studies.

On 27 July 2021, Capita acknowledged receipt of Mr E’s letter of complaint. It said it hoped to respond as quickly as possible and to provide a decision within 10 working days.

Mr E received no response, so he referred his complaint to The Pensions Ombudsman (TPO) and queried whether the figures were correct.

Following correspondence from TPO in July 2022, the Cabinet Office confirmed that it had not received Mr E’s stage two IDRP request from Capita. It agreed to issue a stage two IDRP response by 24 December 2022.

4 CAS-78897-G8T0 On 10 January 2023, the Cabinet Office provided its stage two IDRP response. In summary, it did not uphold Mr E’s complaint for similar reasons to Capita. It also said:-

• It was satisfied that Mr E made a clear and unambiguous choice to take his pension without a lump sum.

• Capita had not erred in paying his pension before his 60th birthday because it was payable earlier with an actuarial deduction. This was made clear in the retirement option form.

• Mr E’s benefits had been processed in accordance with his instructions. If Mr E had any queries, he should have contacted Capita or sought free impartial advice as explained in the retirement option form.

During the course of this investigation, the Cabinet Office provided a copy of the retirement options form that it received from Mr E. It also provided copies of the letters sent by Capita and Mr E.

Adjudicator’s Opinion

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Capita did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Capita provided further comments in response to the Opinion. In summary it said:-

It recognised that Mr E had completed the forms in a way that was contradictory, but it did not believe that it automatically followed that, had Capita contacted Mr E he would have realised his error.

It appears as though Mr E completed every signature box on the paperwork. It believed that it could be argued that if Capita had asked for clarification, Mr E would have told Capita to proceed with the options he chose for claiming his benefits and to ignore the other sections he had completed. Therefore, he would not have realised his error in completing the form.

It was happy to pay the £500 ex-gratia, but it did not agree that Mr E should be paid the difference between the payments he has received to date and the amount he would have received if he had opted for a reduced pension and a lump sum.

The reasons for this were:

It did not believe it automatically followed that Mr E would have realised his error if Capita had questioned his claim form.

It appeared as though it was being directed to continue paying Mr E’s ongoing pension payments at the same rate as though he had not taken a lump sum. Therefore, his pension would be paid at a higher rate for the rest of his life. This means that he would be in a better position than if he had chosen the correct option initially.

In addition, there are difficulties in implementing the direction. It could do this in a number of ways. The first would involve recovering all of the net pension payments made to the member and the tax paid to HMRC. That way, the Benefit Crystallisation Events (BCE) for the pension and PCLS would start again from the date the member confirmed his new options. Considering the member's pension came into payment in November 2020, this option may not be amenable to the member given the large sum of money involved.

The other way to implement the direction would mean that the payment for the PCLS would be an unauthorised payment (as it is more than 12 months since the BCE). The direction states that Capita would be liable for any

6 CAS-78897-G8T0 additional tax liability the member would need to pay. This could be over £10,000 (the unauthorised payment charges would be 70% (split 55% member and 15% scheme)). This seems inequitable given Capita were not solely at fault for this situation. The interest payable on the delayed payment of the PCLS would have to be paid as a Scheme Administration Member Payment and the member would have to pay tax on this. It is not clear whether the Opinion also directs that Capita is expected to meet this tax amount.

Finally, it also needed to consider any implications on Mr E’s lifetime allowance. He may have taken benefits from elsewhere. Mr E would need to confirm whether or not this is the case.

Since Capita’s response to the Adjudicator’s Opinion, Mr E has confirmed that he has not taken and does not have any other pension benefits.

I have considered the additional points raised by Capita and they do not change the outcome. I agree with the Adjudicator’s Opinion.

Ombudsman’s decision

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In addition, there was an opportunity for matters to be put right after Mr E’s emails to Capita on 23 and 24 November 2020 and 4 December 2020. I find that if Capita had reviewed the fact that Mr E’s option form was contradictory and clearly completed incorrectly, along with his request to correct the choice that had been put in place, then the error could have been rectified quickly without any detriment to Mr E.

Capita has argued that it is difficult to implement the remedy suggested by the Adjudicator as a reason for not accepting the Opinion. I find this to be a poor argument. The clearly stated aim of the remedy is to put Mr E back in the position he would have been in had the maladministration not occurred and whether this is difficult for Capita to implement is not a factor to be considered. The remedy put forward in the Opinion is to redress the maladministration identified, so the pension should be paid at the reduced level going forward in line with Mr E’s wishes.

Capita says it seems inequitable that it should be liable for any additional tax liability that Mr E may need to pay given that it was not solely at fault for this situation. But Capita missed an opportunity to correct the matter in late 2020 (when Mr E asked for a new form so he could select the reduced pension and PCLS option) and avoid the possibility an unauthorised payment.

I uphold Mr E’s complaint.

Directions

Capita shall:-

Contact Mr E regarding any other pension benefits he might have drawn. If this requires Capita to liaise with other thirds parties Capita should seek Mr E’s written authority to do so.

8 CAS-78897-G8T0 Calculate what Mr E would have received if a lump sum and a reduced pension had been paid since his retirement date (A).

Calculate the total pension that Mr E has received (B).

Pay Mr E (A) – (B) as a lump sum plus simple interest at the base rate for the time being quoted by the Bank of England from Mr E’s retirement date to the date of payment.

If the payment of the lump sum results in an additional tax liability on Mr E, then Capita should pay Mr E the equivalent amount.

Provide Mr E with written confirmation of the relevant steps that it has taken.

Anthony Arter CBE

Deputy Pensions Ombudsman 6 December 2023

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