Euler Trade Indemnity Pension Scheme · CAS-44231-P1Y7

CAS-44231-P1Y7

Ombudsman’s Determination Applicant Mr D

Scheme Euler Trade Indemnity Pension Scheme (the Scheme)

Respondents The Trustee of the Euler Trade Indemnity Pension Scheme (the Trustee)

Outcome

Complaint summary Mr D’s complaint is that he was not told that an actuarial review (AR) was imminent and that it would commence shortly after he received a cash equivalent transfer valuation (CETV) in April 2018.

Mr D said, had he been informed of the AR, he would have accepted the CETV and arranged his pension transfer rather than waiting until later in the year, by which time the AR had been completed and transfer values had fallen as a result.

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

Mr D was a member of the Scheme between 8 March 1998 and 2 November 2008 and held deferred pension benefits. The Scheme is a defined benefit pension arrangement.

On 16 March 2018, Mr D requested a CETV, which he received on 11 April 2018 (the First CETV). The transfer value of £375,718 was guaranteed until 28 June 2018.

Mr D said he discussed the matter with his independent financial adviser (IFA) and decided not to “rush the process” since bond yields were stable throughout the summer of 2018. Mr D also said that he and his IFA “were confident” that a similar transfer valuation would be “achievable” later in the summer. He took no action and the guarantee period expired on 28 June 2018.

1 CAS-44231-P1Y7 Mr D requested a further CETV on 1 August 2018. This second CETV was calculated on 9 August 2018, by which time the AR had been completed.

On 16 August 2018, the second CETV was issued and quoted a transfer value of £326,931 which was 13% lower than the first CETV. This figure was guaranteed until 8 November 2018.

On 4 September 2018, Mr D emailed Buck Consultants (Buck), the Scheme Administrators, to ask why the valuation had fallen since the first CETV.

On 5 September 2018, Buck replied saying its actuarial staff had prepared the following response:-

• The main reason for the reduction in transfer values was that the approach to “deriving the discount rates” used to calculate transfer values had changed as part of the AR.

• Discount rates were effectively the assumed future investment returns on assets payable until benefits are paid. The higher the discount rates, the less money was required to be held in the Scheme to cover future benefits payments, resulting in lower transfer values.

• The changes adopted created a risk that older members taking transfer values, calculated on the current basis rather than the new post AR basis, could be removing assets from the Scheme above the amount held in reserve under the new proposed funding basis. The new approach provided more consistency for the membership overall but did have the effect of lowering transfer values for members who were over age 45.

• The Trustee had also revised longevity assumptions, which had also decreased transfer values slightly.

• The change in calculation of transfer values had not affected the first CETV as the change was made during the guarantee period for that CETV.

On 6 September 2021, Mr D responded by email and asked the following questions:

• Could Buck confirm when the changes to both the discount rate and longevity assumptions were implemented?

• Could Buck confirm why the transfer value changes, or even the fact that the Trustee had requested a review of transfer values, had not been communicated to him in the previous CETV letter dated 11 April 2018?

On 7 September 2018, Buck responded as follows:-

• The changes to the transfer value basis were implemented when the new transfer value instruction was signed by the Trustee, with effect from 26 May 2018.

2 CAS-44231-P1Y7 • The potential issue, that transfer values being paid out were greater than the reserve, and were therefore reducing the security of remaining members, was identified at the beginning of April 2018. The Trustee was informed of this concern on 12 April 2018 and the decision to proceed with the AR was made on 16 April 2018, which was after the CETV letter had been sent out to Mr D.

On 17 September 2018, Mr D complained to the Trustee that he had not been informed about pending or actual changes to the approach to calculating transfer values. He raised the following points:-

• Buck had told him that the potential issue with transfer values was identified at the beginning of April 2018. This was after the valuation of his CETV on 29 March 2018.

• He believed he should have been told at the point his CETV arrived on 11 April 2018 that the transfer valuation methodology was under discussion with the Trustee.

• Further, he should have been given a specific warning when the decision to implement the changes to the calculation methodology was adopted on 26 May 2018, since he was in possession of a guaranteed offer.

• Had the Trustee made him aware in good time, he would have executed his transfer within the guarantee period.

• He asked the Trustee to make good on the earlier guarantee of £375,718 and allow him three months in which to arrange a pension transfer.

• He sought an apology from the Trustee and compensation for the time spent in dealing with the matter, and for the distress and inconvenience he had suffered.

• He also wanted the Trustee to require Buck to improve its communication to members who were holding a guaranteed CETV when a significant change in approach was under way.

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6 CAS-44231-P1Y7 Adjudicator’s Opinion

Mr D did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr D 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 D which are summarised below:-

• A transaction was unfair if one party possessed salient information and did not share it with the other party. If he had known the AR was underway, he would have proceeded to transfer his pension within the guarantee period.

• At least one other member was informed that an AR was underway during his CETV’s guarantee period, but members with an existing guarantee were not informed and were thus denied salient information that could have helped them make an informed decision to transfer.

• He believed the Scheme Actuary had decided that, because he was over 45, his transfer value should be reduced following the AR.

• He asked how the decision to reduce transfer values for the members over age 45 was reached. He felt this outcome was “very wrong”.

• He did not believe that account had been taken of his special circumstances. His health meant his life expectancy was likely reduced. He wanted to enjoy the pension for which he had worked hard and gave up the right to guaranteed 7 CAS-44231-P1Y7 benefits so that his family could inherit a lump sum rather than a reduced pension on his death.

• He felt no compassion had been shown and was “deeply hurt and offended” that the Trustee could have exercised discretion in his case, but had not done so.

Ombudsman’s decision

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I do not uphold Mr D’s complaint.

Anthony Arter

Pensions Ombudsman

22 October 2021

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