Pension schemes have been encouraged to increase the pre-retirement education given to scheme members, after the pensions ombudsman found the RBS Group Pension Fund “failed in [its] duty of care" to one member.
Legal experts said schemes could flag special cases to make sure they are given due attention, but there is a risk that in focusing on accrued benefits scheme administrators fail to see the whole retirement picture.
Oona Perrett opted out of the final salary scheme in May 2011 to increase her take-home pay, but sought reinstatement into the scheme in August that year after learning voluntary early retirement with enhanced pension was available before age 55. The fund refused the request, according to the determination, which was issued last month.
Perrett had been informed in September 2010 that her job was under review and her department was earmarked for closure. The RBS redundancy terms allow some members to receive an enhanced pension when they elect voluntary early retirement, but Perrett was not reminded of this.
In admin records they should be flagging any anomalies and special cases… The inference here is to raise the standard of communications with members
Anne-Marie Winton, Nabarro
After refusing the request, the scheme sent Perrett a letter, which said: “I can confirm that when you opted out of the Group Fund, you signed an opt-out form confirming that you understood that you would not be eligible for any special early retirement terms if you subsequently retired at the request of the group.”
The ombudsman ruled the scheme “failed in [its] duty of care to Mrs Perrett in not providing her with clear and readily accessible information to enable her to make an informed decision about whether or not to opt out of the scheme”. RBS did not provide a comment by time of publication.
Anne-Marie Winton, partner at law firm Nabarro, said: “[If] a member is going to take a decision which may or may not be in their best interests, there’s a very high bar on the quality of the communication exercises the schemes need to take.”
Winton said Perrett’s eligibility for early retirement made her a special case, adding: “In admin records they should be flagging any anomalies and special cases. It’s almost saying that they need special care."
She added: "The inference here is to raise the standard of communications with members.”
Daniel Taylor, head of administration services at third-party administration provider Premier, said: “Most administrators are focusing on the benefits you’re giving up with regards to accrual [rather] than enhancements related to retirement… it’s all predicated on the basis that the member knows all the benefits that they’re giving up.”
He added that it was often difficult know a member’s motivation for opting out of their scheme, making educating them potentially challenging.
Karen Partridge, head of client services at communication consultancy AHC, said: “The recommendation we would give to our clients is that they need to consider all their audiences. A big aspect of any changes is audience analysis and identifying outliers."
She added a that modelling tool can help schemes educate members without running the risk of advising them.
“A modelling tool is helpful as it allows them to play with it themselves… a personal impact statement sets out in black and white, ‘If you do this, you get that’."
