Local Government Pension Scheme · CAS-32624-Z3X3

CAS-32624-Z3X3

Ombudsman’s Determination Applicant Mrs N

Scheme Local Government Pension Scheme (the Scheme)

Respondent Nottinghamshire County Council (The Council)

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

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2 CAS-32624-Z3X3 • She had emailed the Council requesting a CETV illustration. She was told there was a hold on CETV calculations as GAD were changing the factors.

• She had received the CETV illustration on 11 February 2019. This was six months after her initial request. At the time she received the illustration, she was in hospital.

• She left hospital on 25 March 2019 and had arranged a meeting with her IFA.

• She had wished to transfer her benefits out of the Scheme to enable her to draw down monies for a deposit to purchase a house.

• She had initially telephoned the Council in August 2018 to request a CETV illustration. She was told, at that time, it could not provide CETV illustrations as its system was not yet set up to do this. She was asked to contact it again a few weeks later.

• When she telephoned the Council back, she was informed that it was not possible for her to be sent a CETV illustration. She was told that this was because it did not hold up-to-date details of her National Insurance (NI) contributions.

• On 11 January 2019, she telephoned the Council again requesting a CETV illustration. Instead, she received an estimate based on her deferred pension being put into payment.

• She met with her IFA, and it sent an email to the Council on 17 April 2019, requesting further information so that it could advise her on her options. It took several weeks for a response to be provided.

• Most other final salary pension schemes offered transfers up to and beyond pension age. She was now being prevented from transferring her benefits out of the Scheme because it was less than a year to her 60th birthday.

• It had no record that Mrs N had telephoned the Council to request a CETV illustration in August 2018. At that point its administration system was able to provide CETV figures.

• It held no record of the telephone call in which Mrs N said that she was told it did not hold up-to-date NI contribution details. If the NI contribution figures had been needed, it would have contacted HM Revenue & Customs. However, it already

3 CAS-32624-Z3X3 held a guaranteed minimum pension figure for Mrs N, and this had been used in a CETV illustration provided to her in 2005.

• On 29 October 2018, the Budget had resulted in the Ministry of Housing, Communities and Local Government informing Local Government Pension Funds that new factors would be required. Once published, these new factors were to be used in the calculation of CETVs.

• Until the new factors were published, GAD instructed that the issuing of CETV illustrations was to be put on hold. On 19 November 2018, the new factors were published. However, due to delays with the pension administration system provider, the new factors were not implemented until 8 January 2019. After this date, work started on processing the backlog of CETV illustration requests.

• Its records indicated that Mrs N telephoned the Council on 11 January 2019. During the call, her home address was updated, and her deferred benefits were discussed. A letter was subsequently sent to her on 16 January 2019 quoting her entitlement should her deferred benefits be put into payment.

• It held a record of Mrs N’s telephone call of 22 January 2019. This was the first reference that it had of her requesting a CETV illustration.

• A CETV illustration was sent to Mrs N on 8 February 2019. It should have been made clearer that a restriction applied and an application to transfer would need to have been received prior to her reaching her 59th birthday. All the necessary parts of the transfer process, as listed in Appendix 1, would have had to have been completed by then.

• It was reasonable to expect the IFA to have been aware of the Regulations that governed the Scheme (the Regulations) and to have known about the 12-month restriction. It could not comment on other pension schemes. However, it needed to act within the Regulations.

• The partial uphold was in respect of the fact that the Council should have notified Mrs N earlier that a transfer could not take place once she was within a year of her NRD.

• On the balance of probabilities, the telephone call that Mrs N had said took place in August 2018 had taken place in November or December 2018. This was because it was able to issue CETV illustrations in August 2018. However, it acknowledged that she had been told to contact it again a few weeks later. It upheld that it should have taken Mrs N’s details and issued a CETV illustration when it was in a position to do so, rather than ask her to contact it again.

4 CAS-32624-Z3X3 • When Mrs N telephoned the Council back, she was told that it did not hold up-to- date details of her NI contributions. It upheld that she had either been given incorrect information or a misunderstanding had taken place. It considered that the second explanation was more likely.

• When Mrs N telephoned the Council on 11 January 2019, the initial call handler had passed her on to someone dealing with deferred benefits rather than CETV illustrations. It upheld that there had been a misunderstanding between the initial call handler and Mrs N.

• The IFA requested a CETV illustration on 17 April 2019 and a response was not provided until 29 May 2019. It upheld that it had taken several weeks to respond due to annual leave and workloads. Also, that it would have been better service to have provided an estimate of when the IFA could have expected a response.

• It upheld that it had failed to draw Mrs N’s attention to the fact that she only had until her 59th birthday to exercise her right to transfer. This should have been made clear to her in February 2019.

• It did not uphold the part of Mrs N’s complaint concerning her not being permitted to transfer her benefits out of the Scheme. The Council was required to administer the Scheme in accordance with the Regulations and the law. There was no discretion in this respect.

• The Scheme only allowed for a transfer to take place where permitted by the Pension Schemes Act 1993 (the Act). Extracts from the Regulations and the Act can be found in Appendix 2.

• Mrs N had, for at least part of the period that she was investigating a transfer, access to the IFA. The restriction on transfers in the year before NRD was a standard position in pensions law. It was not unreasonable for her to have expected the IFA to have advised her on this.

• The Scheme asked for NI numbers as part of its process of ensuring that its call handlers were speaking to the correct person. It was likely that there was a misunderstanding between Mrs N and the call handler at the Council in relation to her NI number and contributions.

• Mrs N suggested that she was only told that she was too late to apply to receive a CETV two years after she had originally telephoned and requested one. The Council was not aware that there had previously been any suggestion that Mrs N had telephoned it to request a CETV two years earlier.

• In relation to any delays in providing information to Mrs N and the IFA:-

o It was not responsible for the period from 29 October to 19 November 2018 as it could not produce CETVs without the new factors. Furthermore, the new 5 CAS-32624-Z3X3 factors needed to be implemented on its system, so it was not responsible for the period from 19 November 2018 to 8 January 2019.

o It was responsible for the period from 11 to 22 January 2019.

o It was not responsible for any delays as a result of Mrs N’s hospitalisation.

• By the time the IFA contacted it on 17 April 2019, there was approximately a week left in which the transfer would have needed to have been completed. This was insufficient time.

• It accepted that some distress and inconvenience had been caused to Mrs N due to the items that were upheld in its stage two IDRP response. It offered her a £500 payment in this respect.

• It should not be held responsible for Mr N’s tax bills or any money he could have added to his pension fund. These losses did not flow from a failing by the Council. They were due to Mr and Mrs N’s decision to proceed with their house purchase after they were aware that Mrs N could not take a CETV.

• Both she and the IFA were surprised by the fact that transfers were not possible in the year before her reaching her NRD. The IFA said it believed it had dealt with other local authorities where this restriction did not apply.

• Annual leave and work volumes were not a valid reason for the delays she had encountered.

• She should have not been put in a disadvantageous position because the new factors were not available. Furthermore, there had been a lengthy delay in the Council implementing the new factors.

• There had been no misunderstanding in relation to NI numbers and contributions.

• In relation to the telephone call she made two years earlier, the Council’s auto- response said that calls were recorded. So, it should have a record of this call.

• The Council’s offer of £500 was inadequate compensation for the huge upset and stress it had caused her, particularly during a period of illness.

• Due to her illness, she wanted to move back to Nottingham to be closer to the hospital and her family and friends. The transfer was to go towards a deposit to buy a house in Nottingham.

• Mr N had to transfer one of his pensions into drawdown which led to an extra tax bill and resulted in him only being able to contribute a limited amount to his ongoing pension fund. Mr N’s losses were due to the Council’s failings as they would not have been able to complete their move without taking the actions that they did. 6 CAS-32624-Z3X3 • She considered that compensation should be paid consisting of; £49,941 for the extra tax bill Mr N incurred, £20,000 that Mr N could have added to his pension before retirement, £28,634 for the reduction in her pension due to her not taking the CETV and £10,000 for the distress and inconvenience she had suffered.

Adjudicator’s Opinion

• The Adjudicator noted that there was some uncertainty over when Mrs N first asked the Council for a CETV illustration. Mrs N maintained that there was a two- year delay before she received a CETV illustration which would suggest that the first request was made in early 2017. She also maintained that she made a second request in August 2018.

• The Council said that it was likely that Mrs N first made a request in November or December 2018. Its reason for suggesting this was that Mrs N said that she was told that, when making the second request, the Council was unable to issue CETV illustrations at that time. The Council had confirmed that it was able to issue CETV illustrations in August 2018. It was not until after the Budget on 29 October 2019 that it was required to put a hold on issuing CETV illustrations.

• Unfortunately, no evidence was available to confirm the timing of the initial request made by Mrs N. So, the Adjudicator based the rest of his findings on the first request having been made in November or December 2018. On the balance of probabilities, he took the view that this was the most likely timing. He said this as Mrs N was told, when making her initial request, that the Council was unable to provide CETV illustrations at that time. The period when its administration system was unavailable for such requests fell mainly from November to December 2018.

• The Adjudicator acknowledged that it would have been a cause of frustration for Mrs N that her request for a CETV illustration coincided with a period when new factors were being introduced. However, taking November/December 2018 as a starting point, in the Adjudicator’s opinion, the Council could not be considered responsible for any delay prior to 8 January 2019. In that period, it was waiting on GAD to provide the new factors and for those factors to be implemented in the Scheme’s administration system.

• The Adjudicator took the view that the period that the Council could be considered responsible for was from when the new factors were implemented on 8 January 2019 to when Mrs N was sent a CETV illustration on 8 February 2019. In the Adjudicator’s opinion, this one-month period was not excessive, particularly given that it was likely that the Council had a backlog of cases to process. This was as a result of the provision of CETV illustrations having been put on hold for over two months. 7 CAS-32624-Z3X3 • Having been provided with the CETV illustration on 8 February 2019, in the Adjudicator’s view, there was still time for Mrs N to complete the transfer. However, he noted that she had a period in hospital and was not able to pick up the progression of the transfer again until April 2019.

• In the Adjudicator’s opinion, some time could have been saved in April 2019 if Mrs N had been able to provide her IFA with the CETV illustration she had been sent on 8 February 2019. However, the IFA made a further request to the Council for it to provide another CETV illustration on 17 April 2019. Even if the Council had responded within a week, it would have been too late for the transfer to have been completed before Mrs N reached age 59.

• In conclusion, it was the Adjudicator’s opinion that any delays in the provision of the CETV illustration prior to 8 January 2019 were out of the Council’s control. Once the new factors had been implemented, the Council provided the CETV illustration in a timely manner.

• The Adjudicator noted that there were opportunities in both telephone calls and written communications for the Council to notify Mrs N that her transfer request would have to be received before her 59th birthday. However, this information was readily available to members, including on the Local Government Pension Scheme website. As it was written into the Act, and it was also a common feature within the pensions industry, in the Adjudicator’s view, the IFA should have been aware of this.

• While, it would have been helpful if the Council had notified Mrs N of the restriction earlier, the Adjudicator did not take the view that this amounted to maladministration.

• During the course of Mrs N’s interactions with the Council there were a number of misunderstandings that took place. These were:-

o A conversation where Mrs N got the impression that some missing NI contributions on her record were holding up the provision of the CETV illustration.

o During the telephone call on 11 January 2019, when Mrs N was attempting to request a CETV illustration. The Council’s file note of this conversation refers to Mrs N wanting to claim her deferred pension. She was subsequently sent an estimate of the benefits she would receive if her deferred pension was put into payment.

• The Adjudicator noted that the Council acknowledged these misunderstandings. It also accepted that, when Mrs N made her initial request, it would have been better practice for it to have taken her details and issued a CETV illustration when it was 8 CAS-32624-Z3X3 able to provide illustrations again, rather than asking her to telephone it again at a later date.

• As no recording or transcript of these conversations was available, it was not possible for the Adjudicator to comment with any certainty on the reasons why there was confusion in each instance. The Adjudicator appreciated that these misunderstandings would have been a cause of frustration for Mrs N.

• The Adjudicator noted that the Council had offered Mrs N £500 for non-financial injustice. The Adjudicator did not take the view that the payment of a higher sum was appropriate given the circumstances of the case.

Mr N provided his further comments which do not change the outcome. In summary he said:-

• The facts of the case had not been adequately considered.

• The Council, in its stage two IDRP response, had said that it upheld all items of Mrs N’s complaint other than it not having allowed her to transfer her benefits once she was within a year of her NRD. The items it upheld included:-

o It could have put Mrs N on a waiting list for the provision of a CETV illustration rather than asking her to contact it again at a later date.

o The conversation in which Mrs N had understood that it needed to obtain her NI records, for which it agreed it must take at least some responsibility.

o The confusion during the telephone call on 11 January 2019, for which the Council agreed that it should take some responsibility.

o The failure to draw Mrs N’s attention earlier to the fact that she had to exercise her right to transfer before she was within a year of her NRD.

• These shortcomings, which had been admitted by the Council, had prevented Mrs N from transferring her benefits out of the Scheme. This had cost them tens of thousands of pounds and had left them with no pension, other than that from the State.

I note the additional points raised by Mr N, but I agree with the Adjudicator’s Opinion.

Ombudsman’s decision

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Mr N said that, as a result of Mrs N being unable to transfer her benefits out of the Scheme, they were left with no pension apart from that from the State. I do not agree that this is the case, as Mrs N still has an entitlement to benefits from the Scheme.

In conclusion, I find that the Council cannot be held responsible for the fact that Mrs N did not complete the transfer of her benefits out of the Scheme before she was within a year of her NRD. Furthermore, while some improvements to the Council’s administration procedures have been identified and some confusion took place during telephone conversations, I do not agree that the Council was responsible for any maladministration.

I do not uphold Mrs N’s complaint.

Mrs N is free to approach the Council in relation to the £500 offer that it had made should she wish to take up its offer.

Anthony Arter

Pensions Ombudsman 28 July 2022

11 CAS-32624-Z3X3 Appendix 1 Parts of the transfer process that would have had to have been completed before Mrs N was within a year of her NRD

“1. A transfer payment quotation had been provided to the new scheme.

2. The new scheme providers had conveyed to the individual what the transfer would purchase in the new scheme.

3. The individual had sought independent financial advice (where the transfer payment would be in excess of £30,000).

4. The individual, the new scheme providers and the IFA had signed and returned the various transfer application forms and declarations.”

12 CAS-32624-Z3X3 Appendix 2 Extracts from the Local Government Pension Scheme Regulations 2013 and the Pension Schemes Act 1993

Local Government Pension Scheme Regulations 2013:

“96 - (1) A member may apply for a transfer under Chapters 1 or 2 of Part 4ZA of the Pension Schemes Act 1993 and where the member does so the amount of any transfer payment due in respect of the member under the relevant transfer may only be paid by the administering authority from its pension fund if the transfer payment is a recognised transfer (within the meaning of section 169 of the Finance Act 2004).”

The Pension Schemes Act 1993:

“95 - Ways of taking right to cash equivalent.

(1) A member of a pension scheme who has acquired a right to take a cash equivalent in accordance with this Chapter may only take it by making an application in writing to the trustees or managers of the scheme requiring them to use the cash equivalent in one of the ways specified below.

(1A) In the case of a right acquired under section 94(1), the application must be made -

(a) within the period of 3 months beginning with the guarantee date shown in the relevant statement of entitlement, and

(b) if the cash equivalent relates to benefits that are not flexible benefits, by no later than the date that falls one year before the member attains normal pension age.”

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