Ombudsman hits Teachers’ Pensions with maladministration fine

Mrs N’s case dated back to 2010, when she received a letter from Teachers’ Pensions that included an ‘Additional pension’ leaflet, which said that members could choose to end their monthly contributions and stop payments “at any time”.

The leaflet stated that, in the event the member chooses to stop payments, “a proportion of the benefits will be credited to you, known as a paid-up credit”, adding: “You will not be able to resume a previous election once it has been revoked or if you cease payment for a month.”

My awards for non-financial injustice are intended as an acknowledgement of inconvenience and distress that someone has suffered as a result of maladministration

Anthony Arter, Pensions Ombudsman

In August of that year, Mrs N attempted to purchase the maximum possible amount in additional pension, £5,400, over a period of 20 years. 

The application form she submitted said that somebody who left pensionable employment would not be able to make further contributions, the value of any additional pension purchased instead being determined by contributions already paid.

Teachers’ Pensions subsequently wrote to Mrs N, explaining: “If you have a break in service of more than one month or take up non-pensionable employment, you will be credited with the additional pension paid up to the last day of pensionable employment. 

“You can pay the outstanding contributions to complete the election, but they must be received within one month of leaving pensionable employment.”

It also wrote to her employer setting out that monthly contributions of £436 would be required from November 1 2010 to October 31 2030.

Mrs N subsequently became a member of the career average element of the Teachers’ Pension Scheme in 2015, but in July of that year she was made redundant by her employer. No contributions were deducted from her original purchase. She moved to Cardiff Council in September the same year.

Her previous employer confirmed her employment had ended on July 31 2015, and her new employer confirmed she had begun working for it on September 1 2015. However, things began to go wrong when her new employer, Cardiff Council, contacted Teachers’ Pensions to say that contributions resulting from Mrs N’s first purchase were not being deducted.

The council was instructed to complete a ‘Declaration of liability’ form, which it duly did, only for Teachers’ Pensions to respond that the information the council had provided pertaining to contributions did not reconcile with the amounts it believed to be due.

Cardiff Council responded in September 2015 confirming that the information it had provided was correct. It was not until August 2019, however, that Mrs N’s previous employer wrote to Teachers’ Pensions informing it that no contributions had been paid regarding the first purchase since 2015.

In October that year, Teachers’ Pensions wrote to Mrs N with an invoice stating that she owed more than £26,600 in contributions and accrued interest relating to that purchase. 

Then, in January 2020, it wrote to her again to inform her that, due to a break in pensionable service, her purchase had in fact been terminated in July 2015. It said she no longer owed any arrears and her past employer had been instructed to refund any contributions made since October 2019.

Mrs N then submitted her first formal complaint in April 2020 using the Teachers’ Pension Scheme’s internal dispute resolution procedure. Teachers’ Pensions responded that same month and upheld her complaint, apologising for the way her case had been handled. It said that the break in service meant her purchase had indeed been terminated correctly, and that a paid-up credit had been added to her record.

Mrs N wrote to Teachers’ Pensions again in July asking whether she was entitled to purchase any additional pension, and a few days later challenged the complaint outcome under the second stage of the internal dispute resolution procedure.

This drew a response from the Department for Education, which said Mrs N had been informed about the consequences of a break in service in the letter sent in 2010, which explained that outstanding contributions would have to be paid within a month of her leaving pensionable employment.

The DfE said it was Mrs N’s responsibility to inform Teachers’ Pensions of any break in service, as it was “not cost-effective” for the administrator to monitor additional pension agreements, according to the ombudsman’s summary of the case.

It rejected Mrs N’s appeal on the grounds that Teachers’ Pensions had applied the regulations correctly.

Adjudicator weighs in

Mrs N’s complaint ended up before the ombudsman’s adjudicator, who ruled that further action was required on the part of Teachers’ Pensions. 

The adjudicator found that Mrs N had been provided with the information laying out the consequences of a 30-day break in service both before and after she made her first additional pension purchase.

However, they also found that Teachers’ Pensions’ demand that Mrs N pay outstanding contributions amounting to £26,000 in 2019 was improper, as she was not eligible to make these contributions. The adjudicator said Teachers’ Pensions “should have been aware of this position”.

The adjudicator also held that Teachers’ Pensions had taken too long responding to Cardiff Council, leading to unnecessary delays that prolonged the resolution by around two years, leading to a recommended maladministration fine of £500, something Teachers’ Pensions accepted.

Up to the ombudsman

Mrs N disputed the adjudicator’s verdict, however, meaning the case progressed to Pensions Ombudsman Anthony Arter.

She accepted that “the small print” meant she had not been entitled to continue with her first purchase, but branded the £500 compensation award “insulting”, arguing that it “undermined the purpose of a compensatory regime”, as according to Arter’s write-up of the case.

“It did nothing to caution TP to be better, or get close to the sadness, anger, frustration and worry this matter had caused. The effects were not short term, as the period lasted over two years,” she said.

Mrs N pointed to Vento guidelines — employment tribunal rules around compensation due to injury to feelings — that set the minimum amount at £990. However, Arter dismissed her argument for higher compensation.

“I acknowledge that the matter will have caused Mrs N some distress and inconvenience. However, I find that Mrs N also holds some responsibility for this issue, as she was provided with details of what constituted a 30-day break in pensionable employment provision,” he explained.

“She should have been aware that such a break had occurred after her employment [with her initial employer] had been terminated and, as such, her [first purchase] would cease.”

Arter said that she should have been “reasonably aware” of whether she was still making contributions, “so I consider Mrs N had some responsibility for which deductions, if any, were being made and what these represented”.

He did agree with the adjudicator’s opinion that Teachers’ Pensions should have known better than to request payments on outstanding contributions in October 2019 that she was not eligible to pay.

“I consider that the distress caused by the error of requesting that Mrs N pay the alleged outstanding contributions [was] short term,” he said, adding that the two-year delay caused by Teachers’ Pensions prolonging the resolution would have compounded the inconvenience.

Arter dismissed Mrs N’s appeal to Vento guidance, however, on the grounds that it applied in cases of employment discrimination, which had not occurred in this case.

“My awards for non-financial injustice are intended as an acknowledgement of inconvenience and distress that someone has suffered as a result of maladministration. Awards of this nature are not made with the intent to punish the parties responsible for poor behaviour,” he explained.

“I find that [Teachers’ Pensions’] maladministration has caused Mrs N significant distress and inconvenience and an award of £500 is reasonable in the circumstances.”