Pensions disputes: Ombudsman will not interfere with reasonable business policies

The case (5 pages / 561 KB) concerned a member of an occupational pension scheme, who contacted his scheme’s administrator to ask that his pension, which was being paid into the joint bank account he held with his wife, be redirected to his wife’s personal bank account to maximise the interest available in respect of that account. The administrator refused on the basis that its policy was to pay a pension to the member’s own bank account unless the member was unable to manage their own affairs.

The member also attempted to change the bank account to which his pension was paid through the scheme’s online portal, to redirect it to his wife’s bank account. This change was rejected in accordance with the scheme’s established policy and the member’s pension continued to be paid to his joint bank account.

The member then complained to his scheme’s trustee in accordance with the internal dispute resolution procedure (IDRP) and asked the trustee to overrule the administrator’s decision to refuse to pay his pension to his wife’s bank account. The trustee upheld the administrator’s decision.

The member asked the trustee if it would be illegal for his pension from the scheme to be paid to his wife’s bank account. The trustee concluded that, while it would not be illegal to pay the pension to his wife’s bank account, it was unwilling to depart from its standard policy, which was to pay pensions directly to their recipients unless there were extenuating circumstances, such as the existence of a power of attorney. The desire to secure a better level of interest in a third party’s bank account was not, in the trustee's opinion, an extenuating circumstance.

The individual also complained to the trustee that communication from the scheme’s administrator had been poor. But the trustee disagreed.

In his complaint to the PO, the member raised the same points as in his complaint through the IDRP. He also claimed that the rejection of his change request on the scheme’s online portal was a breach of the General Data Protection Regulations (GDPR) or, in response to the adjudicator’s opinion, a fraudulent act.

The PO did not uphold the member’s complaint. It found that there had been no maladministration on the part of the trustee or administrator, so it was not open to him to make directions in this case. The decision to pay members’ pensions to their own bank accounts and not to third parties was a reasonable business decision that had been made by the trustee and administrator to protect the scheme’s assets and to ensure that benefits were paid to the correct people. The PO confirmed that it would “only intervene in a business decision if it could be shown to be perverse or unreasonable”.

“This decision provides welcome reassurance that the PO will not interfere with a scheme’s policies or procedures, unless they are perverse or unreasonable. Trustees, providers and administrators can take comfort from this and may find it helpful to document the reasons behind their policies and procedures, so that the information is easily available if needed to respond to member enquiries,” said pensions expert Simon Laight of Pinsent Masons.

The PO also ruled that the rejection of the change request the member had made through the online portal did not constitute a breach of GDPR and the administrator was justified in rejecting the change request because it was in breach of its legitimate business policy. The trustee was entitled to continue processing the member’s data to fulfil its legal obligation to pay his pension.

The PO also concluded that there was no evidence that the communication from the administrator to the member had been poor. While the response had not been what the member was hoping for, that did not mean that it was unreasonable or inadequate.