Lloyds Bank Pension Scheme Number 2 · CAS-46341-T0B3

CAS-46341-T0B3

Ombudsman’s Determination Applicant Mrs R

Scheme Lloyds Bank Pension Scheme Number 2 (the Scheme)

Respondents Lloyds Banking Group Pension Scheme Trustees Limited (the Trustee) Lloyds Banking Group (the Bank) Willis Towers Watson (WTW)

Outcome

Complaint summary

Background information, including submissions from the parties In April 2016, Mrs R became aware that certain other members of the Scheme had been awarded a ‘special increase’ on their retirement pensions, having seen a ‘Special Pensions Information Sheet’ that a colleague had received with their benefit statement.

On 9 April 2018, Mrs R telephoned WTW, the administrator of the Scheme, to ask whether a ‘special increase’ had been applied to her pension.

On 16 April 2018, WTW wrote to Mrs R in response and said that she had only received a normal annual increase.

On 22 April 2018, Mrs R sent a letter to WTW complaining that:-

• To qualify for a special increase, the ‘Special Pensions Information Sheet’ provided in 2015 specified that members had to:

1 CAS-46341-T0B3 o have completed 10 or more years continuous pensionable service immediately prior to retirement or leaving;

o reached age 65 between 1 April 2014 and 31 March 2015; and

o be in receipt of pension of less than £10,000 [a year]…following the ordinary pension increase.

• The Special Pensions Information Sheet also stated that “The special increase is 15% of the pension, with a minimum of £1,000 for those with pensions of less than £7,500 [a year]…”

• This criteria should still apply since she had not received notification that it had been cancelled.

• Having reached age 65 on 15 April 2018, she met the qualifying criteria for a ‘special increase’ from April 2019.

On 4 May 2018, WTW wrote to Mrs R and said that there had previously been a discretionary pension increase payable to members with a pension below £10,000 a year but this was no longer applicable.

On 17 May 2018, WTW sent a letter to Mrs R stating that:-

• The ‘Special Pensions Information Sheet’ that Mrs R referred to included three parts to the qualifying criteria for a special increase.

• The second part of the criteria was that a member needed to have “reached age 65 between 1 April 2014 and 31 March 2015.”

• Mrs R reached age 65 on 15 April 2018, and on that basis, she did not qualify for a ‘special increase’.

On 2 April 2019, Mrs R telephoned WTW to check if she would receive a discretionary increase on her pension.

On 9 April 2019, WTW wrote to Mrs R and said:-

• ‘Special increases’ are a discretionary payment awarded by the Bank.

• The Trustee reviews these awards on an annual basis and informs WTW if the increase should be applied.

• A letter would be sent to Mrs R should she become eligible for a ‘special increase’ in the future.

On 30 May 2019, WTW again wrote to Mrs R and said:-

• The Bank reviews pensions in payment periodically and ‘special increases’ are applied on a discretionary basis.

2 CAS-46341-T0B3 • This is provided for under the rules governing the Scheme.

• Mrs R had no entitlement to a ‘special increase’ because the Bank had decided to suspend discretionary payments.

• This followed a recent court case involving the Bank regarding Guaranteed Minimum Pension (GMP) equalisation, the outcome of which was still being considered.

On 3 June 2019, Mrs R telephoned WTW and complained that:-

• It was unreasonable of the Bank not to pay her a discretionary pension increase in a similar way to a former colleague who had received such an increase.

• It was not her fault that the Bank was unable to pay the additional pension due to the cost of GMP equalisation under the Scheme.

• She would like to see a copy of the Scheme Rule regarding discretionary pension increases.

On 11 June 2019, WTW wrote to Mrs W and said:-

• Discretionary pension increases were awarded at the Bank’s discretion, outside of the Scheme Rules but there were no immediate plans to apply any such increases.

• Several factors were assessed when discretionary pension increases were considered, including the funding of the Scheme, upcoming costs, and investment market conditions.

On 18 June 2019, Mrs R wrote to WTW complaining that:-

• The letter of 9 April 2019 stated that discretionary increases were reviewed by the Trustee on an annual basis.

• By contrast the letter of 30 May 2019 suggested that pension reviews were carried out by the Bank and ‘special increases’ awarded on a discretionary basis.

• Then WTW’s letter of 11 June 2019 stated that special increases were awarded at the Bank’s discretion outside of the Scheme Rules.

• She would like clarification on these points since she had been provided with conflicting information.

On 13 August 2019, the Bank wrote to Mrs R in response and said:-

• ‘Special increases’ are awarded entirely at the discretion of the Bank and are not an entitlement under the Scheme Rules.

• Those increases have historically been applied to improve the pensions of low paid members with long service to the Bank. 3 CAS-46341-T0B3 • The Bank last applied a ‘special increase’ in April 2016, partly due to a court case concerning GMP entitlements.

• Once the implications of that court case were understood, the Bank would be better placed to consider ‘special increases.’

• Mrs R had not been treated differently to any other member who retired between 1 April 2018 and 31 March 2019.

On 22 November 2019, Mrs R complained to the Trustee under the Scheme’s Internal Dispute Resolution Procedure (IDRP), that she had unreasonably been denied a special increase.

On 13 December 2019, the Trustee wrote to Mrs R and said that it did not consider that her complaint was suitable for the IDRP, because ‘special increases’ are awarded solely at the discretion of the Bank. So, her dispute was not with the Trustee.

Mrs R’s position

Mrs R says:-

• In its letter of 13 August 2019, the Bank said that she had not been paid a ‘special increase’ due to a court case regarding GMPs.

• That response was unreasonable, because the Bank has a responsibility to provide equal benefit entitlements to all lower paid members, not only those who had met the qualifying criteria in previous years.

• The GMP issue should be considered separately to a member’s entitlement to special increases on their pension.

• She is suffering a financial loss of approximately £50 a month, plus the index- linked annual increases on that sum, due to not being awarded a ‘special increase’.

• That supplement should be added to her pension and be backdated to April 2018, when she met the qualifying criteria.

The Bank’s position

The Bank says:-

• Special increases are awarded solely at the Bank’s discretion and are subject to the qualification criteria that the Bank deems to be appropriate at any given time. It was last awarded in 2016, and the Bank has reviewed the payment every year since then, but after considering all relevant factors, it has decided not to make the payment.

4 CAS-46341-T0B3 • Accordingly, in 2019 Mrs R and any other members who had reached age 65 in the 12-month period covering 1 April 2018 to 31 March 2019, were not granted the discretionary increase. Neither Mrs R nor any other member is automatically entitled to an augmentation on their pension.

• The Bank would review the possibility of a special increase, and the qualifying criteria for it again once the Scheme’s GMP equalisation process has been completed. As principal employer of the Scheme, the Bank can augment any member’s pension and provide additional benefits that they would not otherwise be entitled to receive under the Scheme Rules.

Adjudicator’s Opinion

• The ‘special increase’ was provided by the Bank on a discretionary basis, outside of the Scheme Rules. So, in the Adjudicator’s view it was for the Bank to determine the eligibility criteria for members who qualify for ‘special increases’, and the periods during which the payment would apply. The Bank last applied a ‘special increase’ in April 2016, due in part to the court case concerning GMP equalisation. Several other factors were assessed when such discretionary pension increases were being considered, including funding of the Scheme, upcoming costs, and investment market conditions.

The Trustee, the Bank and WTW accepted the Adjudicator’s Opinion, Mrs R did not, and the complaint was passed to me to consider. Mrs R provided her further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the additional points raised by Mrs R.

Mrs R’s additional comments

• In its letter of 13 August 2019, the Bank has said that once the implications of the court case regarding the GMP issue were understood, it would be better placed to consider the payment of special increases. That court case was concluded in November 2020, giving the Bank ample time to assess the financial implications 5 CAS-46341-T0B3 for the Scheme. So, the Bank should now have carried out a review of the discretionary increase policy. However, there is no indication that the Bank has done so.

• The Bank has a duty of care to all lower paid members not only those members who had met the qualifying criteria in previous years when the Bank was not involved in a court case. Not to do so is unfair and undermines the reasons behind the allowance of a Special Increase. So, the discretionary special increase should be applied to her pension and backdated to 1 April 2018.

• WTW provided misleading information in the letter of 30 May 2019 and caused difficulties in contacting the correct department within the Bank to resolve her complaint. Had she been given correct information; she would reasonably have expected the special increase to be applied to her pension with no condition except the qualifying criteria which ‘she had met in April 2018’.

• Since 9 April 2018 she has put a considerable amount of time and effort into making her complaint. This has included making numerous telephone calls and generated large amounts of correspondence which shows that the process has been frustrating. So, an award should be made in recognition of the distress and inconvenience caused.

Ombudsman’s decision

6 CAS-46341-T0B3

I do not uphold Mrs R’s complaint.

Anthony Arter

Pensions Ombudsman 22 May 2022

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