Teachers Pension Scheme · CAS-43017-B9C7

CAS-43017-B9C7

Ombudsman’s Determination Applicant Mr N

Scheme Teachers’ Pension Scheme (the Scheme)

Respondents Teachers’ Pensions (the Administrator)

Surrey County Council (the Employer)

Outcome

Complaint summary Mr N’s complaint is that the Employer, and the Administrator, incorrectly informed him that he was entitled to an unreduced pension from the Scheme.

Mr N has said that, as a result, his retirement plans have been put on hold, he has had to downsize his home and he is now left with half the income he expected.

Background information, including submissions from the parties In 1989, Mr N took up a teaching role with the Employer and in 1996, he joined the Scheme.

On 31 December 2011, Mr N became a deferred member of the Scheme.

At a later date, Mr N took up a senior, non-teaching role with the Employer, and was invited to join the Local Government Pension Scheme (LGPS). Mr N was given the opportunity to transfer his Scheme benefits into the LGPS but chose not to.

In 2018, the Employer began restructuring its children services function and offered its staff the opportunity to apply for voluntary redundancy (Redundancy).

On 8 November 2018, Mr N contacted the Employer to enquire about Redundancy, as he would have reached the minimum retirement age of 55 in March 2019, if his application for Redundancy was accepted.

1 CAS-43017-B9C7 On 30 November 2018, the Employer sent Mr N notional figures for Redundancy and an estimate of his LGPS benefits. It gave Mr N a deadline of 10 December 2018, to decide if he wished to apply for Redundancy.

Shortly thereafter, Mr N submitted his application for Redundancy to the Employer.

On 8 January 2019, Mr N emailed the Employer to see if its severance review group had considered his application for Redundancy.

In late January 2019, the Employer informed Mr N that his application for Redundancy had been accepted.

On 1 February 2019, Mr N emailed the Employer and said:

• the Administrator had confirmed that following Redundancy, he could take his retirement benefits from the Scheme at age 55, with no reduction; and

• the Employer needed to contact the Administrator and provide the relevant forms and approval.

On 15 February 2019, the Employer contacted the Administrator, and said:

• it had offered Mr N Redundancy and he would reach age 55 in March 2019;

• Mr N became a deferred member of the Scheme on 31 December 2011 and he had subsequently joined the LGPS; and

• Mr N wanted to take his Scheme benefits by way of early retirement, without a reduction.

On 18 February 2019, the Administrator responded with a standard email template, that explained:

• an unreduced pension could be paid to a member who had reached age 55 when their employment was terminated by way of Redundancy or organisational efficiency; and

• the Administrator would pay an actuarially reduced pension and lump sum to the Employer. At which point the Employer would pay the shortfall to cover the difference, resulting in an unreduced retirement benefit.

In response, the Employer said:

• it intended to pursue the option of unreduced retirement benefits for Mr N; and

• it suggested a retirement date of 30 April 2019.

On 8 March 2019, the Administrator responded with the same email template as that sent on 18 February 2019.

On 25 March 2019, the Employer responded to the Administrator and said:- 2 CAS-43017-B9C7 • The Administrator’s email was “a template response, identical to the one it was sent on 18 February.”

• The Administrator should confirm:

o the cost to the Employer for unreduced retirement benefits; and

o what forms, if any, the Employer or Mr N needed to complete.

On 1 April 2019, the Employer informed Mr N that it was still waiting for the Administrator to provide early retirement figures and details of the cost of unreduced retirement benefits. It also said that:

“It is the policy of the Surrey County Council to award unreduced premature retirement benefits to Teacher scheme members aged 55 and under normal pension age whose employment has been terminated on the grounds of redundancy or organisational efficiency. Having checked with a colleague in our own Pensions team, they have confirmed that this would include voluntary redundancy.

On this basis, the acceptance of your request for voluntary severance on the grounds that you would be able to access both your teacher and LGPS pots without reductions can be confirmed.”

On 15 May 2019, the Administrator responded to the Employer’s email, from 25 March 2019, it apologised for the time taken to respond and explained that:

• Mr N did not meet the criteria for unreduced payment of his Scheme retirement benefits because he was offered Redundancy;

• redundancy was classed as a severance payment (Severance); and

• the Scheme regulations did not allow for early retirement with an unreduced pension if the member had received Severance.

On 16 May 2019, in response the Employer said that:-

• The Administrator had taken three months, to confirm that Mr N was not entitled to early retirement with an unreduced pension. This put the Employer in a “challenging position.”

• Its internal pensions team had confirmed that by taking Redundancy, Mr N was entitled to an unreduced pension at 55. It had advised Mr N on this basis.

• The Administrator should confirm:-

o What regulation specifically stated that Mr N was not entitled to unreduced early retirement benefits having accepted Severance and whether there was any discretion available. 3 CAS-43017-B9C7 o Whether Mr N’s benefits would be reduced permanently if he took early retirement as a deferred member of the Scheme.

o The value of Mr N’s reduced and unreduced benefits at age 55.

o What the mandatory compensation costs would be if it granted unreduced early retirement benefits.

o The process for Mr N to claim early retirement with either reduced or unreduced benefits.

On 17 May 2019, Mr N completed his last working day, with the Employer.

On 24 May 2019, the Employer emailed Mr N and explained that:-

• The Administrator had confirmed he was not entitled to unreduced early retirement.

• He could take early retirement from age 55, but with an actuarial reduction.

• It recommended that Mr N contact the Administrator to query his entitlement.

On the same day, Mr N responded to the Employer. He said he was “horrified” to receive the Employer’s email and explained that:-

• He had received written confirmation that he could take his Scheme benefits, unreduced.

• He had only accepted Redundancy because the Employer had confirmed that the Scheme benefits and the LGPS benefits would be paid unreduced, from age 55.

On 31 May 2019, the Administrator responded to the Employer’s email of 16 May 2019. It apologised and explained that:-

• To take early retirement, with unreduced benefits, a member had to leave active employment by Redundancy, or by way of organisational efficiency.

• Mr N was a deferred member of the Scheme when he took Redundancy, so he was not entitled to take his benefits from the Scheme, at age 55, unreduced.

• Mr N could take early retirement, at age 55, but with actuarial reductions.

• It was the Employer’s duty to administer the Teachers (Compensation for Redundancy and Premature Retirement) Regulations 2015.

On the same day, the Employer contacted Mr N to confirm that it was still investigating his entitlement from the Scheme following his Redundancy.

4 CAS-43017-B9C7 On 14 June 2019, the Employer emailed Mr N to apologise. It confirmed that he was not entitled to unreduced Scheme benefits, before he reached age 60, because he was a deferred member of the Scheme.

On 20 June 2019, the Administrator sent the Employer confirmation of the reduced and unreduced benefits that Mr N was entitled to from the Scheme: -

• Reduced benefits: £6,247.07 as an annual pension and a Lump Sum of £19,153.52.

• Unreduced benefits: £7,702.93 as an annual pension and a Lump Sum of £23,617.17

On 25 June 2019, Mr N met with the Employer. The Employer offered Mr N a “without prejudice” lump sum of £7,500 (the Offer), to supplement the shortfall between his reduced and unreduced annual pension. The deadline to accept the Offer was 5 July 2019.

On 3 July 2019, Mr N made a complaint under the Employer’s complaint procedure. In summary, he said:-

• He only accepted Redundancy on the understanding he could access his unreduced Scheme benefits when he reached age 55. He had received written confirmation that he was entitled to this.

• He was still in employment with the Employer when it was notified that he was unable to take unreduced benefits.

• He had surrendered an endowment policy to pay off his mortgage. This was in expectation of receiving his Scheme benefits unreduced.

• He could not afford to take the Scheme benefits with a reduction, meaning his overall retirement income, from the LGPS and the Scheme, had been reduced by half.

• The deadline imposed on the Offer had caused him further distress.

Between July and September 2019, Mr N continued to correspond with the Employer about his ongoing complaint.

On 10 September 2019, the Employer responded to Mr N’s complaint. It did not uphold the complaint, explaining, in summary:-

• It had “acted in good faith” based on the information provided by the Administrator.

• It had no discretion to enhance Mr N’s pension due to the Scheme regulations.

• The Offer was still available for Mr N to accept.

5 CAS-43017-B9C7 • It advised Mr N to make a complaint with the Administrator under the Scheme’s Internal Dispute Resolution Procedure (IDRP), due to the provision of erroneous information.

On 16 September 2019, Mr N made a complaint under stage one of the Scheme’s IDRP. Mr N explained that:-

• The Administrator had sent incorrect information to the Employer.

• Had the Administrator sent the Employer the correct information, he would not have accepted Redundancy, leaving behind a 30-year career.

On 30 September 2019, the Administrator responded to Mr N’s stage one IDRP complaint and said:-

• It did not uphold Mr N’s complaint.

• It had sent the Employer standard, generic emails that were not tailored to Mr N’s specific circumstances.

• The requirements for unreduced retirement benefits were set out in the Scheme regulations and it had no discretion with regard to this.

• It would not grant Mr N unreduced retirement benefits or make good any shortfall in his entitlement.

• It apologised that its previous correspondence with the Employer was misleading.

On 14 October 2019, Mr N asked for his complaint to be investigated under stage two of the Scheme’s IDRP as has he remained dissatisfied with the Administrator’s response, explaining that:-

• He did not feel the Administrator had fully understood his complaint.

• It was unclear why the Administrator had responded to the Employer’s specific questions, on both occasions, with standard and generic responses.

• The Administrator’s misleading information had put him in a difficult position.

• He had to downsize his house to be able to “afford to live”.

On 29 October 2019, the Department of Education responded to Mr N’s complaint. It did not uphold Mr N’s stage two IDRP complaint and provided a similar response to the Administrator’s stage one IDRP response. It concluded that the Employer’s email of 15 February 2019, was clear that it was referring to a deferred member of the Scheme and said that “It is disappointing that only generic information was provided to the Employer initially”.

6 CAS-43017-B9C7 Mr N’s position:-

• He contacted the Employer in February 2019, after his application for Redundancy was accepted, to establish his financial position for both of his pensions.

• Based on the information that he was given on 1 April 2019 he had considered that retirement was affordable, because he could access both pensions with no reduction at age 55.

• Had he been given the correct information about the Scheme benefits he would not have taken Redundancy.

• His Scheme retirement benefits will be reduced if he takes them before he reaches age 60. As a result, he is only in receipt of his LGPS pension.

• His retirement income has been reduced by half and he has had to downsize his house in order to afford to live on his income.

The Employer’s position:-

• Mr N accepted Redundancy because it had informed him that he could, in principle, take early retirement with an unreduced pension from the Scheme. However, it did not provide specific figures until 20 June 2019. So, it was not reasonable for Mr N to enter into any commitments before he had received confirmation of how much he would receive.

• It is likely that Mr N had planned to downsize his house before he was informed that he was no longer entitled to an unreduced pension from the Scheme.

• Mr N has not shown any evidence that he had tried to mitigate his losses by seeking an alternative form of employment.

• While he is not obliged to take an actuarially reduced pension, had he chosen to, his reduced annual pension would be £6,247.07 and a lump sum of £19,153.52.

• The Offer made to Mr N was “fair and reasonable” as it covered the shortfall between the reduced and unreduced annual pension for five years.

• It took appropriate and reasonable steps to obtain confirmation and clarification about Mr N’s benefits within the Scheme.

The Administrators position:-

• It can only pay benefits in accordance with the Scheme regulations. In addition, it did not have any discretion to enable the payment of Mr N’s benefits unreduced before age 60.

• Mr N is a deferred member of the Scheme, so he does not meet the requirements for an unreduced pension, despite taking Redundancy.

7 CAS-43017-B9C7 • It could have provided the Employer with a more detailed response. But it was not recognised that Mr N was a deferred member of the Scheme when the response was sent.

• It should not be required to meet the cost of providing an unreduced pension to Mr N, by doing so, this would constitute unjust enrichment.

Adjudicator’s Opinion

8 CAS-43017-B9C7

Mr N did not accept the Adjudicator’s Opinion and his complaint was passed to me to consider. Mr N provided his further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the additional points raised by Mr N. He said:-

• He did not agree that the Offer put him back in the position he would have been in, had he not been provided with the misinformation. He believed that he should be compensated with the value of the difference between the reduced and unreduced lump sum and annual pension. Mr N calculated that this amounted to £63,000.

• He believed that by taking an unreduced pension, the Offer would only account for the difference of the reduced and unreduced yearly pension, for five years. After this, his pension would remain reduced for the duration of his lifetime.

• While he accepted that he was not entitled to a reduced pension at age 55, he believed that the Employer should provide further compensation in addition to the Offer.

• His decision to retire was only made possible by making significant lifestyle adjustments. This included downsizing his house and paying off his mortgage. As of now, all of his retirement plans were on hold and he had to seek alternative employment as a labourer for a landscape gardening company to ensure he had sufficient income to survive.

• His decision to accept Redundancy was, in part, based on his online annual benefit statement from TP. This, coupled with the confirmation from the Employer that he could take unreduced benefits from TP, led him to take Redundancy on the terms offered, because he could afford to.

• He was offered a new position with the Employer at the same time as the Redundancy exercise. He declined the role because the Employer confirmed that he could take unreduced benefits when he reached age 55 having taken Redundancy.

• He accepted the award of £500 to be paid by the Administrator. However, because the Employer was not asked to offer additional compensation, he believed that the Employer was not being held accountable for its actions.

9 CAS-43017-B9C7 Ombudsman’s decision

10 CAS-43017-B9C7

The complaint is partly upheld against the Administrator, and I make the appropriate direction below.

Directions Within 21 days of the date of this Determination, the Administrator shall pay Mr N £500, in recognition of the significant distress and inconvenience he has suffered.

Anthony Arter

Pensions Ombudsman 29 April 2021

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