Council to compensate member after persistently giving incorrect info

A former employee, known as ‘Mr D’, complained to TPO after South Tyneside Council repeatedly told him he could defer claiming his pension benefits to age 75.

Mr D argued that as a result of the mistake, he made different financial decisions than he would not have done had he been told accurate information, and therefore should be compensated.

Mr D became a deferred member of the Tyne and Wear Pension Fund in August 1985. His normal retirement date was set for his 60th birthday, which was in March 2018.

The possibility that Mr D will receive less from the scheme by way of pension payments than he would otherwise have done had he transferred out is too remote for any hypothetical shortfall to be within the scope of the council’s duty of care to provide accurate benefit statements

Anthony Arter, Pensions Ombudsman

Over the years, South Tyneside Council, on behalf of the scheme, sent Mr D deferred benefit statements that wrongly told him he could defer claiming his pension from the scheme until age 75.

Between December 2017 and April 2018, Mr D and the council corresponded about deferring claiming his pension. Then, on April 4 2018, the council wrote to Mr D informing him that he could not defer his benefits.

In the letter, the council said: “On reviewing your case, I can confirm that you do not have the option to defer claiming payment of your Local Government Pension Scheme benefits, as was previously stated in our letter to you. Nor can you transfer those benefits to another provider as you are within one year of your normal pension age in the scheme, which is 60.

“In fact, your only option is to receive payment of your LGPS benefits with effect from your normal retirement date at age 60.”

Council admits error

After he received the letter, Mr D complained to Tyne and Wear Pension Fund via its internal complaints process. He pointed out that because of the council’s error he had made decisions that he would not have done had he known the correct information.

Mr D added that he would have structured his finances differently and have given more thought to transferring his benefits away from the scheme, and that he would like to defer claiming his pension to age 75.

The internal disputes process agreed that the council had provided Mr D with incorrect information about deferring his pension until age 75. However, it found that the council had acted in accordance with regulations and relevant legislation in informing Mr D he was unable to defer his pension to age 75, and that this was not a possibility.

The council accepted Mr D may have suffered financial loss as a result of the error and suggested Mr D contact TPO if he was dissatisfied with the outcome.

In a further letter from the council, dated April 2 2019, the council acknowledged misstatements had been made that may have impacted Mr D’s financial planning. In response, it offered £500 for the distress and inconvenience the situation caused, which Mr D accepted, but not in full settlement of his complaint.

Complaint partially upheld

Mr D took the complaint up with TPO, which partially upheld his complaint and ordered the council to pay a further £1,500 to him for the stress and inconvenience caused.

TPO agreed that the council had incorrectly informed Mr D on multiple occasions that he had the option to defer claiming his benefits from the scheme until age 75.

It stopped short, however, of holding the council responsible for any financial loss caused by its misstatement, or agreeing that there would likely be any long-term financial loss experienced because of the errors.

The ombudsman said Mr D’s evidence submissions concerning what he would have done had he been able to defer taking his pension were “not entirely consistent”.

Mr D said he planned to take the pension at “whatever accrued lump sum and pension applied”, which would provide him with an income and enable him to divest some of his assets to his children to reduce his estate’s potential inheritance tax liability.

However, shortly afterwards he also said he would be able to “look at drawdown” at any point between age 60 and 75.

In addition, Mr D had submitted a letter to his financial adviser that stated, given his seven-figure investment portfolio and the income it provided, he would not require any pension payments during his lifetime and the funds should therefore be passed over entirely to his beneficiaries upon his death.

TPO believed Mr D’s decision to remain in the scheme beyond his retirement date was influenced, at least in part, by an incorrect assumption that he would later be able to transfer out of the scheme at a point before he turned 75.

The ombudsman argued that the council could not have known of his mistaken assumption, and that it was the council’s duty to provide correct information, rather than advice on what to do with it.

TPO pointed to a page of the LGPS website, which specifically stated that “an option to transfer… must be made at least 12 months before your normal pension age”. In addition, Mr D received a factsheet from the council in December 2017 that echoed this point.

Mr D also told TPO that his inability to transfer out of the scheme will result in IHT and income tax consequences, but the regulator said that because any disadvantage in relation to IHT would not be incurred by Mr D himself but his survivors, it was unable to consider that claim for financial loss.

Pensions Ombudsman Anthony Arter said: “The possibility that Mr D will receive less from the scheme by way of pension payments than he would otherwise have done had he transferred out is too remote for any hypothetical shortfall to be within the scope of the council’s duty of care to provide accurate benefit statements.

“So, it would be unreasonable to hold the council liable for any financial loss.”

As a result, TPO found that Mr D had experienced a loss of expectation rather than a financial loss and upheld his complaint in part.