Ford Hourly Paid Contributory Pension Fund · CAS-45563-V7Q9

CAS-45563-V7Q9

Ombudsman’s Determination Applicant Mr A

Scheme Ford Hourly Paid Contributory Pension Fund (the Fund)

Respondents Ford Pension Funds Administration Limited (the Administrator)

Ford Pension Fund Trustees (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties CAS-45563-V7Q9

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• The conditions for paying a trivial commutation lump sum are set out in legislation. A trivial commutation lump sum is only permissible if the value of the member’s pension benefits is less than £30,000. As the value of Mr A’s entitlement was greater than £30,000, he should not have been offered the option of taking trivial commutation.

• The Rules only permit a CETV up to 12 months prior to NRD. So, he had no entitlement to a CETV after age 64. This is in line with pensions legislation.

• The only benefit payable from the Fund at his NRD was a pension.

Mr A responded to the Trustee and said that he should be offered the option of a trivial commutation lump sum.

Adjudicator’s Opinion

The Administrator and the Trustee agreed that Mr A was provided with incorrect information regarding his entitlement to a trivial commutation lump sum and whether he could transfer his benefits. The provision of incorrect information amounted to maladministration. However, this did not mean that the Trustee or the Administrator should pay Mr A a benefit that he was not entitled to. For the complaint to have succeeded, Mr A must have been able to demonstrate that it was reasonable for him to have relied on the misinformation and that he suffered a financial detriment as a direct result.

In the Adjudicator’s view it was not reasonable for Mr A to have relied on the February Letter as the basis for his retirement planning. The February Letter stated that as the value of Mr A’s benefits was less than £30,000, he “may” be able to exchange his pension for a one-off lump sum. As a figure in respect of the one-off lump sum was not quoted at the time, the Adjudicator expected Mr A to have queried this with the Administrator and to check whether he was eligible for a trivial commutation lump sum.

5 CAS-45563-V7Q9 Furthermore, as the retirement information form that Mr A completed only gave him the option of an annual pension, in the Adjudicator’s opinion it was not reasonable in the circumstances for Mr A to assume that he would be entitled to take a trivial commutation lump sum.

The Adjudicator noted that when Mr A returned his completed form to request a trivial commutation lump sum, she would have expected the Administrator to contact him. It should have explained the situation to Mr A so that he was aware that the pension was the only option available to him from the Fund. Instead, the Administrator ignored his request and put the pension into payment.

Mr A has said that the Administrator initially informed him he could transfer his benefits so that he could take a lump sum. He has also said that he would have requested a CETV had he not been incorrectly informed that he could take a trivial commutation lump sum. In the Adjudicator’s opinion as the incorrect information was provided to Mr A less than a year before his NRD so at that point he was already outside the time limit for initiating a transfer, Mr A should, instead, have been provided with clear information so that he was aware that the option to take a CETV was no longer available to him as he was within 12 months of his NRD.

In the Adjudicator’s opinion Mr A had not suffered a financial loss. He had instead suffered a loss of expectation in that he believed he would receive a lump sum rather than an annual pension. In recognition of this the Administrator should pay Mr A £500 for the significant non-financial injustice it had caused him.

Mr A did not accept the Adjudicator’s Opinion. In response he said that there had been earlier instances of misinformation from the Administrator regarding whether he could transfer his benefits, and this had stopped him requesting a CETV at an earlier date.

As Mr A did not accept the Adjudicator’s opinion, the complaint was passed to me to consider. Mr A provided some additional comments which are summarised below:-

• He made financial decisions based on a lump sum being paid after being assured by the Administrator that this could happen.

• He was always reassured he had time to take a lump sum from his pension pot.

• He had a transfer value quote in January 2019 and was in discussions with a financial adviser to prepare to move to another scheme that accepted defined benefit pensions. Everything was put on hold as the Administrator made it clear to him he still had time and could transfer out.

• He wanted to transfer his pension prior to receiving the Administrator’s letter indicating that he could have a trivial commutation lump sum. When he received the February Letter it seemed a better option to keep everything in house. 6 CAS-45563-V7Q9 The Administrator accepted the Adjudicator’s opinion but provided the following additional information in response to Mr A’s comments:-

On 5 July 2018, Mr A telephoned the Administrator to say that he was considering taking early retirement and could it issue an early retirement quote.

On 13 July 2018, the Administrator wrote to Mr A to say that he could only take his pension from the Fund at age 65.

On 19 December 2018, Mr A telephoned the Administrator to ask if he could be issued with a CETV as he had previously requested one in July 2018. There is no record of this being previously requested however it did act on his instructions.

On 3 January 2019, a CETV was issued to Mr A for £38,399.00. Mr A could have acted on this quote and transferred his benefits had he so wished.

I have considered the additional comments provided by both parties but I agree with the Adjudicator’s opinion.

Ombudsman’s decision Mr A complained that he was misinformed by the Administrator that he could take his pension benefits as a one-off lump sum. In addition, he said he lost the opportunity to transfer out of the Fund.

34. Mr A received the February Letter on 22 February 2019 indicating that he may be entitled to a trivial commutation lump sum as his benefits were less than £30,000. The Administrator accepts that this information was incorrect as the letter should have said that Mr A was entitled to a one-off lump sum “if” his benefits were less than £30,000. It contends that Mr A could have acted on the January 2019 CETV quote and transferred his benefits had he so wished.

Mr A said that after receiving the incorrect information in the February Letter he decided not to act on the CETV quotation he had received in January 2019 but instead opt to receive a lump sum from the Fund.

Given that the CETV quotation had valued Mr A’s benefits at £38,399, I would have expected Mr A to have queried why the February Letter indicated that his benefits were now below £30,000 before he took the decision not to transfer his benefits out of the Fund. Further, the February Letter did not provide a figure for the lump sum and the annual pension amount was the only option that could be selected. I would also have expected Mr A to have queried whether the information about the trivial commutation lump sum was correct before relying upon it. Had he done so it would have come to light that trivial commutation was not an option for him and also that the January 2019 CETV quotation had been issued in error as he was by that time within one year of his NRD.

7 CAS-45563-V7Q9 While I note Mr A’s suggestion that he made financial decisions after being assured by the Administrator that a lump sum could be paid, there is no clear evidence that he was told this, or that he was told at any point that he had plenty of time to transfer out of the Fund at a later date.

There was however clearly some confusion on the part of the Administrator, regarding whether or not, Mr A still had the option to transfer his benefits out of the Fund when the January 2019 CETV quotation was issued. The Administrator should have made clear to Mr A that the option to take a CETV was no longer available to him as he was within 12 months of his NRD. I find its failure to do so amounts to maladministration.

In summary, I find that it was not reasonable for Mr A to have relied on the incorrect information in the February Letter without verifying the information provided. However, the provision of the incorrect information on the part of the Administrator, and its failure to be clear that there was no longer an option to transfer out of the Fund, will undoubtedly have caused Mr A significant non-financial injustice which should be recognised.

I partly uphold this complaint.

Directions

Anthony Arter CBE

Deputy Pensions Ombudsman 22 August 2023

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