Latest ombudsman decisions – and what trustees can learn from them

First ruling on auto-enrolment and inducement

The case PO-3830 Beveridge (February 16 2016) relates to a member who agreed to leave his final salary scheme in return for a monthly cash supplement of 15 per cent of salary.

When this contractual entitlement later transferred to a new employer and that employer reached its automatic enrolment staging date, it wrote to the member to tell him that as legislation obliged it to make a 1 per cent employer contribution to a pension scheme, it would deduct that from his 15 per cent supplement.

The ombudsman ruled that the contractual entitlement meant the employer should not have treated the member in the same way as any other employee being auto-enrolled.

The Hughes v Royal London judgment presents an additional window of opportunity for the determined scammer

To put the matter right, the employer was ordered to consult with the member and, if he chose to opt out and continue to receive the 15 per cent supplement, reimburse him the additional 1 per cent payments that he would have received prior to the company staging.

Helpfully, the pensions ombudsman made it clear he did not consider that the options constituted an employer inducement to opt out of auto-enrolment (and so were not in breach of legislation).

Pensions liberation and the requirement to be an 'earner'

In PO-7126 Hughes (June 30 2015) the ombudsman accepted that a provider could refuse a transfer out of a member’s benefits, as the member was not receiving any earnings from her employer under the receiving scheme and so had no statutory right to transfer. 

In February 2016 the rug was pulled from under this line of reasoning with the High Court deciding in Hughes v The Royal London Mutual Insurance Society Ltd [2016 EWCH 319] that the member had the right to transfer if she had earnings from any source, not just from an employer under the receiving scheme. 

This judgment removed one argument that could be made by transferring trustees and providers as to why a member might not have a statutory right to transfer, presenting an additional window of opportunity for the determined scammer.

The ombudsman has issued a press release, confirming he accepts the ruling and reiterating that if, having undertaken appropriate due diligence, it is not possible for trustees and providers to establish that there is no statutory right to transfer, the duty is to make payment.

Therefore, where transfers have been refused on the basis that the member was not an earner in the receiving scheme, such decisions should be reviewed.

Limitation periods – can members 'run down the clock'?

In Webber v Department for Education [2015] 023 PBLR (023), the High Court confirmed that a scheme could not claim back overpayments made more than six years before “the relevant date when the limitation period is to be regarded as having stopped (the cut-off date)”.

The judge went on to suggest that this cut-off date should be the date in 2011 that the member complained to the ombudsman (but left this to the ombudsman to formally determine).

However, when the case returned to him in PO-8094 Webber (February 2 2016) the ombudsman took a different view, holding that the cut-off was the earlier date on which the scheme notified the member of the overpayments. The effect of this was that the scheme could claim back overpayments made in the six years leading up to November 2009. 

Trustees and providers may welcome this outcome. The approach canvassed by the judge would have allowed a member to deliberately delay bringing a complaint to the ombudsman in order to run down the limitation clock. Mr Webber is appealing this decision.

Dominic Harris is a partner and Keeley Frampton a senior associate at law firm CMS Cameron McKenna