Pensions disputes: Ombudsman re-states approach to complaints

This month marks the start of a campaign to celebrate the 30^th anniversary of the service, which began investigating and determining complaints about occupational and personal pension schemes on 1 April 1991. The PO has received over 100,000 written enquiries, resolved more than 25,000 disputes and issued almost 9,000 determinations in that time.

‘Mistake’ vs ‘maladministration’

In Mr N (PO-28826), the PO dismissed a member’s complaint against his self-invested personal pension (SIPP) provider. Mr N claimed that the provider had failed in its duty of care towards him by failing to take into account the existence of a separate annuity when providing figures regarding his lifetime allowance (LTA). As a result, Mr N incurred a tax charge of £23,156. He also complained about the provider’s complaints procedure.

The adjudicator and PO both disagreed with Mr N, finding that the provider, as a SIPP administrator, did not owe a duty to provide Mr N with general advice in relation to his pension or other financial matters or to anticipate what he should do with regard to his uncrystallised fund. The provider’s responsibility extended only as far as providing information about the SIPP – the kind of advice that Mr N appeared to have expected went beyond the role of an administrator.

Importantly, the PO said that it would have been clear to Mr N from the SIPP documentation that the provider was not providing tax or any other financial advice, and also that his LTA position would have been assessed when he reached age 75. The provider’s statements clearly stated that the LTA calculations related to “this scheme” only; and not the annuity or any other pensions for which the provider was not responsible.

The PO considered that Mr N’s complaint had been adequately dealt with, and the provider’s response was not unreasonable. In the PO’s view, the provider’s communications to Mr N met the FCA requirements of being clear, fair and not misleading. Although the tax charge was initially calculated incorrectly, this mistake was corrected and would not have caused Mr N a loss. The provider apologised and offered an ex gratia payment of £100 for distress and inconvenience.

In his determination, the PO drew a useful distinction between mistakes and maladministration. “It would be nice to think that mistakes never happen, but inevitably sometimes they do, as in this case,” he says, before explaining that the mistakes did not cause Mr N a loss and do not amount to maladministration. Where mistakes are made, the PO will consider the way the provider responded. In this case, he was satisfied that an apology and an ex gratia payment of £100 was an adequate response.

In its recent fact sheet, the PO reminds parties that its approach to investigating complaints is based on whether, where something has gone wrong, the member has suffered injustice as a result. ‘Injustice’, as defined by the PO, means either financial loss or non-financial injustice such as inconvenience, disappointment or distress. While compensation may be awarded for non-financial injustice, this will usually only be the case where the non-financial injustice is significant.

The fact sheet also reminds parties that the PO cannot fine or punish respondents. He can only consider whether there has been injustice and, if so, how that can be put right. In doing so, he will consider what action the member took, or could have taken, to avoid or minimise any loss.

Members’ responsibilities

In Mr T (CAS-30129-V8B7), the PO emphasised the member’s responsibility for decisions made relating to his pension funds. The PO only partially upheld Mr T’s complaint about delays caused by two providers in transferring pension funds between themselves and then finally on to another annuity provider, which he claimed caused him to suffer financial loss.

The PO’s adjudicator decided that, while some of the delays were caused by the providers and amounted to maladministration, others were the responsibility of Mr T or his financial advisers. Mr T had decided to reverse some transfers, and the advisers had to obtain a revised quotation on a different basis when they decided immediate vesting should apply to some of the fund.

The PO did not agree with Mr T’s claim that the delays had caused him financial loss. Although market fluctuations meant that the final transfer payment was over £1,800 less than the initial transfer, it had been Mr T’s decision to go ahead with the final transfer at that time, rather than wait until the transfer value increased again.

The PO pointed out that, when the basis of the annuity quotation changed and the rates reduced significantly, he would have expected the provider to check with the advisers that Mr T wished to proceed before requesting the funds. However, as the transaction was later reversed, there was no evidence that this led to any financial loss.

The providers were ordered to pay Mr T £500 in equal shared for the significant distress and inconvenience caused to him by their processing transfers more slowly than was necessary.

The decision shows that the PO is willing to acknowledge that the complexity of some pension transfers will have an impact. He said that, while he could appreciate Mr T’s frustration with the progress of his transfer, this was a complex transaction involving a non-standard enhanced annuity rate, made more difficult by Mr T’s decision to change the annuity basis part way through the transfer.