Ombudsman criticises Aon, Willis Towers Watson over benefits error

A complaint was brought by Mrs D against Aon, Willis Towers Watson and the trustee of the GE Capital Pension Scheme after Aon, formerly the scheme administrator, gave her inaccurate figures about the early retirement benefits available to her.

Mrs D, who joined the scheme in 1988 and became a deferred member in 1991, was told in 1992 that the deferred pension available to her at date of leaving was £1,811.28 a year, while the estimated pension payable from her normal retirement age was £11,952.84 a year.

In 2018, she asked Aon to provide her with details of the benefits available to her should she choose to retire early, on her 59th birthday, and those that would be available to her should she retire at 65.

While there is no dispute that there had been maladministration on the part of Aon, the starting point is that Mrs D is only entitled to the benefits provided by the rules of the scheme

Anthony Arter, Pensions Ombudsman

Aon told her that, in the former event, she would be eligible for a full pension of £12,473 a year or a maximum tax-free lump sum of £65,187, plus a residual pension of £9,778.

Aon’s quotation came with the proviso, however, that “the benefits quoted are estimates and are not guaranteed — we will let you know the actual amounts once you have confirmed which option you would like to take, and we have all the information we need to work out your benefits”.

“In the event of a conflict between the figures we have quoted and your actual entitlement, your benefits will be strictly limited to your entitlement as provided in the governing documentation,” it stated.

Mrs D asked Aon twice more in 2018 to verify the figures it had provided, including one request to have it put in writing. Aon complied, and on both occasions said that the figures had been calculated correctly.

Willis Towers Watson subsequently took over as scheme administrator, and Mrs D requested that it provide her with the equivalent figures for if she decided to retire on her 60th birthday.

After pursuing Willis Towers Watson for an update, she was told that the valuation was complex and that the quote would be delayed.

When, in March 2019, she finally received the quotation, it told her she was entitled to a full pension of £5,999 a year, or a tax-free lump sum of £31,185, with a residual pension of £4,677 a year.

Mrs D queried the discrepancy between the two quotes, and was told Aon had made an error when it had made the initial calculation.

Plans left ‘in tatters’

Mrs D made a complaint, and subsequently referred the matter to the ombudsman, saying that she had relied upon higher figure shown in Aon’s 2018 valuation when deciding to close her consultancy business, having determined that she could sacrifice her business income — around £46,500 a year — and “just about make ends meet” until she was in receipt of her state pension.

Besides occurring additional expenses in changing her lifestyle, she argued that, without the consultancy business to support her, she would be unable to make additional national insurance contributions to her state pension.

She told the ombudsman: “I realised the quotation in April 2018 was quite different to the one made in 2016, hence my querying it on several occasions. I am sure I did mention the difference in the values hence wanting to be completely sure of the position.

“I also consulted an [independent financial adviser] who advised me to check again. My actions were taken after being informed on several occasions that the quotation was correct.

“I also chose to wait over 12 months before taking the pension. During this time, the error could and should have been picked up by Aon.”

She argued that Aon’s mistake had cost her tens of thousands of pounds, “left her carefully laid plans in tatters”, and “led to the early termination of her successful business”, according to the ombudsman’s report.

Missing records

The trustee acknowledged that the delay in Willis Towers Watson providing an update quotation had caused inconvenience, explaining that it had been the result of “teething problems” emerging from the administration changing hands.

It apologised and offered her a £1,000 goodwill payment, but said that it could only pay her the benefits to which she was actually entitled, and said it was unreasonable for her to have relied upon the higher figure when it was so clearly different from her last quotation.

Aon likewise made this point, and said it had told her the figure in the quotation it sent was not guaranteed.

It acknowledged that she had asked it to check the veracity of the quoted figures, but said it had been unable to locate the logs and records of one phone call in particular, in which Mrs D claimed she told Aon of the discrepancy between its quotation and previous quotations, though it could produce the record of her other calls.

In the event, this proved crucial. The ombudsman’s adjudicator found, in line with the contention of Aon and the trustee, that the benefits were only estimates and had not been guaranteed, that any financial decisions made by Mrs D on the basis of the 2018 figures were entered into at her own risk, and that she took no steps to mitigate her loss after the mistake was revealed.

Aon’s mistake did not constitute “negligent misstatement”, the adjudicator said, though had she done as she said she did and informed Aon of the discrepancy, it would have been reasonable to expect Aon to identify and correct the mistake.

Willis Towers Watson was guilty of maladministration in its delay, however. 

Mrs D contested the claim, which then went to the ombudsman. Arter found in line with his adjudicator that Mrs D had acted in the “unreasonable belief” that the Aon figures were accurate.

“While there is no dispute that there had been maladministration on the part of Aon, the starting point is that Mrs D is only entitled to the benefits provided by the rules of the scheme,” he said.

He found that the £1,000 goodwill payment offered by the trustee, as well as a £1,000 goodwill payment offered by Aon, was “equitable given the circumstances”, and ordered them to pay within 21 days in recognition of “the severe on-financial injustice which she has suffered dealing with this matter”.