Mckinsey And Company Incorporated Uk Support Staff Pension Scheme Cas · CAS-82206-Q2H6

CAS-82206-Q2H6

Ombudsman’s Determination Applicant Ms X

Scheme McKinsey and Company Incorporated UK Support Staff Pension Scheme (the Scheme)

Respondent McKinsey and Company Incorporated (UK) Pension Trustee Limited (the Trustee)

Outcome

Complaint summary

It did not inform her that she had the opportunity to change her investment decision, so she has not been able to make this choice and has suffered financial loss.

She does not agree with its assertion that she did not intend to change her investment decision and would have done so had she been informed of the opportunity to make a change.

It has refused to provide an assurance that her investments are being safely managed.

The Trustee has inappropriately used Mr N’s personal data to demonstrate that Ms X would not have made any investment changes.

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Background information, including submissions from the parties The Scheme is a hybrid pension Scheme, comprising both defined benefit and defined contribution pension plans. Ms X holds a Defined Benefit Plan (the DB Plan) and a Defined Contribution Plan (the DC Plan) in the Scheme.

Members of the Scheme who hold a defined contribution plan are provided with an option to amend their investment choices each year during an “election period” that opens in November, with changes taking effect at the end of the same year.

Capita was the administrator of the Scheme at the time of the events that are the subject of Ms X’s complaint.

Ms X reached her Normal Retirement Age (NRA) in March 2018. The pension from her DB Plan came into payment in May 2018. However, Ms X elected to defer accessing her DC Plan.

On 1 August 2018, Ms X provided her signed authority to Capita to allow Mr N to act on her behalf in respect of her membership of the Scheme. On this same day, Mr N emailed Capita to ask how to view the details of the DC Plan through the online portal. At that point, only the DB Plan was visible.

On 8 August 2018, Capita informed Mr N that because Ms X was a Pensioner member of the Scheme her portal access had changed, and she could not view the DC Plan online. It stated any information could be obtained through an email or telephone request.

On 9 August 2018, Mr N emailed Capita to request the details of how Ms X’s monies were invested and how the investments had performed. Mr N’s email also noted his understanding that the investment election window and the associated “annual investment decision” would be required shortly (the Investment Window). He asked specifically when the deadline for that was and when the related information and forms would be provided. Ms X was copied into that email.

On 20 August 2018, Capita emailed Mr N and Ms X with the fund details requested and it also stated:

“The annual investment decision is available in November, with the switch taking place on 31 December 2018. Communications regarding this process will be sent to members prior to this date”.

On 30 September 2018, Mr N emailed Capita to request a valuation of the DC Plan as of 1 October 2018.

On 4 January 2019, Mr N emailed Capita to ask for an updated valuation of the DC Plan and to question whether the information regarding the Investment Window had been issued to Ms X. 2 CAS-82206-Q2H6

On 9 January 2019, Capita responded to provide the required fund value, and it also reiterated that the Investment Window was in November (of 2018) and said that an email should have been issued to Ms X at the beginning of the same month.

On 15 January 2019, Mr N emailed further to explain Ms X had been unable to identify receipt of any such email and he requested a copy of it.

On 18 January 2019, Capita responded to Mr N to explain that an email was not automatically issued to Ms X and that this was because she was a “Pensioner of the Scheme”. It noted that the Investment Window was open at the same time for all members of the Scheme, but that only one investment switch per year was permitted. However, it stated it was able to process a request at that time and ahead of the next window, if that was required.

On 21 February 2019, Mr N emailed Capita further to outline his concerns and state a claim for financial loss due to Ms X not being able to update her investment choices. He explained that no investment changes should be made due to a concern about mistakes occurring. He asked for details of the complaints process and noted he had contacted the Trustee for its assurances with regards to the management of Ms X’s investments.

Mr N has provided a copy of his letter to the Trustee Chairman that was issued on 14 May 2019 (the May Letter). This set out the problems that had occurred in relation to Ms X from December 2017, including the primary issue regarding notification of the November 2018 Investment Window. The additional problems were, in summary: -

• In December 2017 Capita issued valuations to Ms X setting out her options in terms of her retirement benefits and these were incorrect.

• The revised documents were not issued until March 2018. These included the incorrect value of an earlier Uncrystallised Funds Pension Lump Sum payment and that was only corrected after a further week.

• The issues Ms X encountered caused a delay in her pension being put into payment. Further, her pension income payments were due to start in May 2018, but Capita failed to make that payment and only did so a couple of weeks later. Ms X was subsequently without this income for six weeks.

• In July 2018, Ms X’s online access to the DC Plan was removed without any notification and this was not rectified until March 2019.

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The May Letter also set out concerns about the governance of the Scheme and how Ms X’s savings were being managed. In respect of the governance of the Scheme, the May Letter noted this was specifically about, “…the inadequacy of the scheme’s conflict of interest safeguards, the trustee group’s poor representation and lack of expertise, and the opacity and inequality of member communications”. Mr N requested the Scheme’s financial records and the Trustee’s meeting records to “...help us better understand the nature and extent of these problems and identify which individual Trustees are most culpable”.

As part of the May Letter a further claim for financial loss was made and Mr N posed the question of how it might be possible to retrospectively decide what previous investment choices would have been made and determine any potential financial loss, considering there was by that point the benefit of hindsight. It was also noted that separate losses had been incurred by Ms X through the time of an adviser and his and Ms X’s own time.

On 28 June 2019, the Trustee Chairman wrote to Mr N to address his concerns (the June Letter). The June Letter: -

• Acknowledged the service provided by Capita in relation to all the issues raised had fallen short. The letter apologised and confirmed an offer of £500 as recognition of the standard of service provided and non-financial injustice caused.

• Explained that when Ms X put the DB Plan into payment, she became categorised on Capita’s records as a Pensioner member rather than a deferred member in relation to that pension. She subsequently could not access the details of the DC Plan online. This was due to her being the first member of the Scheme with this scenario, where the DB Plan had been put into payment, but the DC Plan had not.

• Further explained that Capita’s processes did not allow for this scenario. Also, where a member of the Scheme is categorised as a pensioner, information regarding defined contribution savings is not generally issued to them. This is why notification was not issued with regards to the Investment Window regarding the DC Plan.

• Stated that the Trustee wished to address the issues specific to Ms X before responding to the more general concerns about the governance of the Scheme, which would be responded to separately.

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With regards to the claim for financial loss, the June Letter stated it was not agreed that such a loss had been incurred, and it made the following related points: -

• Capita’s email of 20 August 2018 provided notification of the Investment Window, so notice had been given.

• An offer to implement investment changes was provided to Ms X, with changes to take effect on 31 March 2019, but this was declined due to the concern that it would not be completed correctly.

• It is the Trustee’s view that the “tangential issues” raised such as that about the Trustee’s conflicts of interest policy are not sufficient to prevent any instructions for a change of investment.

• The investment choices available were the same since the Scheme switched to defined contribution accrual (on 1 July 1999).

• Mr N had been asked which investment changes would have been made, but the response has been that this was impossible to retrospectively decide.

• On the balance of probabilities, no investment changes would have been made even if notification had been issued in Nov 2018.

On 20 July 2019, Mr N wrote a letter to formally complain on behalf of Ms X and instigate the Scheme’s Internal Dispute Resolution Procedure (IDRP). The overall position of Ms X is summarised under point 30.

On 18 October 2019, Ross Trustee Services Limited, the professional Trustee of the Scheme (the Professional Trustee) issued the IDRP stage one response (the October Letter) on behalf of the Trustee. The October Letter stated there was no refusal by the Trustee to address the wider concerns raised. The Trustee’s position was that it chose to prioritise other issues raised that were directly related to Ms X’s pension benefits and it had informed Mr N in the June Letter these wider concerns would be responded to. They were responded to as part of the October Letter, and these responses are summarised below.

With regards to concerns about the administration of the Scheme and the safety of Ms X’s investments, the October Letter explained that: -

• The Trustee board had an administration and governance sub-committee that meets quarterly, with the purpose of monitoring the Scheme’s administration and governance.

• Following the review of Capita’s performance, the decision had been made to replace it with a new administrator. 5 CAS-82206-Q2H6

• Capita had no role in relation to how the Scheme’s investments are managed, and the Trustee had no concerns that the standard of its administration created any risk to the investments, including how they performed.

• Copies of the Scheme’s annual report and accounts had been provided previously, as requested.

With regards to the concerns raised in relation to the Scheme’s conflicts of interest safeguards, the October Letter stated: -

• The two client-facing Trustee Directors did not have any involvement with the Scheme administrator and did not plan to in the future.

• It was common for a trustee board to include individuals from the sponsoring employer’s finance team. There might be the potential for conflict in relation to defined benefits schemes (in relation to funding requirements), but the funding deficit for this element of the Scheme was low in relation to the financial resources of the sponsoring employer, so the risk for any conflict was very low.

• The Trustee included conflicts of interest as a standing agenda item at each of its meetings. It also maintained a conflicts of interest register.

• Conflict issues form part of the regular training received by the Trustee directors from the Trustee’s legal adviser.

• Any conflicts that might arise were managed in accordance with the Trustee’s conflicts policy.

With regards to the representation and expertise of the Trustee, the October Letter stated: -

• It was not unusual for trustee boards to include active members with no deferred or pensioner representation. Especially with defined contribution schemes (which only has active or deferred members).

• It was not clear why having long-serving employees of the sponsoring employer on the trustee board might be a negative. Mr N was asked to clarify this. The Trustee considered this a positive as it helped ensure a good flow of information between the membership and trustee board.

• The Trustee directors undertake regular appropriate and professional training and receive support from professional advisers.

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• The Trustee board includes the Professional Trustee that had significant relevant experience.

With regards to member communications and the information available to them, the October Letter stated: -

• The Trustee complied with strict disclosure requirements. An annual benefit statement and an annual Chair’s statement was made available to scheme members (in relation to defined contribution members). An annual summary funding statement was provided for defined benefit members.

• An online Investment Decision Guide was provided to support members with the investment decision window process.

• It was acknowledged that current employees of the sponsoring employer had online access to some information that was not available to deferred members. It was not however practical to offer that resource to all deferred members of the Scheme at that time.

• It was recognised that the online “Pensions Portal” could be more user-friendly and a project was ongoing at the time to upgrade it.

In response to the claim for financial loss due to Ms X’s assertion she was unable to place a change of investment, the October Letter stated that the law would require Ms X to be able to demonstrate that she would have made investment changes if she had received her investment information on time and what the likely changes would have been. Mr N had been unable to demonstrate that on her behalf. That element of the complaint was not upheld.

On 10 January 2020, the Professional Trustee issued a letter to Mr N in response to his questions and comments that followed the October Letter. This further letter reiterated the position of the Trustee in relation to the claim for financial loss and stated the concerns regarding the governance of the Scheme had been addressed (in the October Letter). It was also confirmed to Mr N that the Scheme’s IDRP was now at an end.

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Ms X’s position

A summary of the main concerns raised by Ms X or by Mr N on her behalf is provided below.

• The Trustee did not inform Ms X that she had the opportunity to change her investment decision. The email notification in August 2018 was not sufficient, and Capita still failed to notify her later, as it had said it would do.

• The estimated cost of “being unable to make investment choices” between November 2018 and November 2021 was two percent of the value of her investments (as of November 2021), and she had incurred financial loss of £57,237.

• Due to the distress she had suffered, she should receive a payment for non- financial injustice in the amount of £10,000.

• Ms X does not agree with the Trustee’s view that she did not intend to change her investment decision. Her professional experience shows she was financially literate. In 2018 she was receiving professional advice from three different parties. Following advice from her retirement advisor, Ms X asked Mr N to make enquiries about the Investment Window (which he did in August 2018).

• Given that Ms X had reached her NRA and had retired, it was reasonable to assume that she wanted to move her investments away from medium-term growth to lower risk and to generate more consistent returns.

• The offer to change investments that was made after the Investment Window ended was declined because there had been no assurance her investments were being safely managed. Ms X made clear from the outset that she had no intention of allowing any changes to her investments without an assurance from the Trustee that they were being safely administered. There had been a number of different issues over a period of eighteen months, and she did not wish to risk any changes

• There was a repeated refusal by the Trustee to answer questions and provide any assurances as to whether the Scheme was being safely administered. The Trustee had not directly provided any assurance that Ms X’s investments are being safely managed.

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• There was also a repeated refusal by the Trustee to investigate the serious weakness in its governance that had been uncovered.

The Trustee had inappropriately used Ms N’s personal data to demonstrate that Ms X would not have made any investment changes.

The Trustee’s position

A summary of the main points made by the Trustee is provided below.

• The Investment Window email was not sent to Ms X due to a failure of Capita’s systems, a failure that had been corrected. That element of her complaint was upheld and in recognition of it and the other issues encountered (as set out in the May Letter and under point 17), an offer of £500 was made for non-financial injustice.

• Capita’s email of 20 August 2018 provided notification of the Investment Window, so notice had been given.

• The Trustee did not agree financial loss has been incurred and it did not agree to meet the claim for non-financial injustice.

• The law would require Ms X to be able to demonstrate that she would have made investment changes if she had received her investment information on time and what the likely changes would have been. She had been unable to do so.

• Ms X acknowledged she was financially literate, and that she was receiving professional advice from three different parties regarding her retirement.

• The investment options available to Ms X for the DC Plan in 2018 included four pre-selected portfolios – namely, Moderate active, Lifestyle active, Balanced passive or Balanced Lifestyle passive.

• Custom elections were also available, to invest in a range of individual funds. A Selection was made by Ms X in the 2012 Investment Window to invest the whole of the DC Plan in Compass Funds. These were managed by the McKinsey Investment Office, and the Trustee would not adjust the custom election made by Ms X without her consent.

• It was therefore open to Ms X ahead of reaching her NRA and after she did, to make an election to move to either available lifestyle portfolio as her chosen investment strategy. She did not and has not done so.

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• Further, Capita provided a “special opportunity” for Ms X to amend her investment choices outside of the normal Investment Window, but she chose not to do so.

• Ms X’s wider concerns have been addressed in the October Letter. There was no refusal by the Trustee to address these concerns, and it made clear that they would be responded to separately, as they were.

• Ms X had access to detailed information about the Scheme’s operation and investment options. Details regarding the operation of the Scheme and investment options were available to members on the Scheme’s MyPension website. The Scheme’s annual report and accounts for recent years had also been provided. These had been audited, and the auditor provided an unqualified audit opinion.

• The element of the complaint about the use of Mr N’s data had been upheld and an apology was provided. An offer for non-financial injustice was made to Mr N.

Adjudicator’s Opinion Ms X’s complaint was considered by one of our Adjudicators who concluded that no further action was required by the Trustee. The Adjudicator’s findings are summarised below.

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• The Adjudicator highlighted that Ms X had stated she had sufficient professional experience that evidenced she was financially literate. Also, that she received professional advice about her retirement savings and that following this advice, she asked Mr N to raise the question with Capita about the Investment Window. The Adjudicator subsequently concluded that Ms X had a good understanding of finance and investments and that her pensions and the Investment Window were discussed as part of the advice she received and that the advice was provided before the Investment Window was open.

• The Adjudicator also identified that in accordance with Ms X’s request, Mr N contacted Capita to question when the Investment Window was open and that it responded to them both by email on 20 August 2018 to confirm it was open in November 2018. The Adjudicator stated that it was subsequently clear that Ms X was aware of the Investment Window and the period of it.

• The Adjudicator highlighted that Ms X contacted Capita on 4 January 2019 when further notification of the Investment Window did not arrive and concluded that because of her awareness that switches would take place on 31 December 2018, a reasonable action of someone intending to amend their investments would have been to contact Capita earlier. The Adjudicator noted that if Ms X had done so, she would most likely have been able to instruct any investment changes before the Investment Window closed.

• The Adjudicator also referred to the fact that, after it had been identified the further notification of the Investment Window had not been issued, Capita had provided Ms X with an opportunity to make changes to her investments outside of the Investment Window. The Adjudicator stated that that was an appropriate action for Capita to take at that time to try and resolve the matter for Ms X. It was noted that Ms X had chosen not to make any changes and that she had not instructed any changes since.

• The Adjudicator explained he was aware that Ms X has been clear throughout her complaint to state that no changes to her investments would be instructed by her until she received the necessary assurances and answers from the Trustee. The Adjudicator subsequently considered if the wider concerns raised by Ms X had been addressed by the Trustee and whether, as she contended, she had been prevented from making any investment changes because of that issue.

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• In the Adjudicator’s opinion, the Trustee had not refused to address the wider concerns raised by Ms X. The June Letter explained they would be addressed and they were in the October Letter. The Adjudicator’s view was that the October Letter provided appropriate and sufficient responses to Ms X’s concerns and that it was a genuine and reasonable attempt by the Trustee to provide her with the answers and reassurance she was seeking.

• The Adjudicator also referred to the point made by the Trustee that the Scheme administrator did not manage Ms X’s investments in any way, and that it was taking action to replace the administrator in place at the time of her initial complaint (Capita), after it had reviewed its “performance” and concluded it had not met the required standard. The Adjudicator said that this information should reasonably have provided Ms X with some level of reassurance. That was because it was evident the standard of the administration of the Scheme was at the root of her complaint. The problems she encountered that gave rise to her wider concerns were all seemingly caused by Capita’s administration. These problems were not directly related to her investments, the “safety” of which was ultimately her chief concern. The Adjudicator concluded it was subsequently important for the Trustee to have sought to reassure Ms X by addressing the matter of the standard of the administration of the Scheme, which he stated it had in his view done in an appropriate way.

• The Adjudicator was satisfied the Trustee had met its requirements with regards to the information Ms X had access to about her pensions. That was because the Trustee had explained the information that was available generally to all members, online and otherwise. Further, the issue Ms X had with her online access had been resolved and the Trustee had provided Ms X with some of the additional information requested. That information was a copy of the Scheme’s annual reports and accounts, and it had explained these had been audited.

• The Adjudicator acknowledged that Ms X did not feel that she had been suitably reassured or received all of the information and answers she required. However, after considering the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, the Adjudicator confirmed that in his opinion there was no requirement for the Trustee to provide any additional reassurances or information beyond that already provided to Ms X or at the level she was seeking. It was also noted that it was not the role of the Ombudsman to audit a Scheme’s operation.

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• The Adjudicator did not agree with Ms X’s assertion that she had been prevented from or was unable to make changes to her investments. It was his opinion that Ms X had opportunities and would reasonably have had other opportunities to do so, and it had been her choice not to. The Adjudicator concluded Ms X had not incurred the financial loss she was seeking.

• With regards to Ms X’s claim for non-financial injustice, the Adjudicator referenced the TPO factsheet titled “Redress for non-financial injustice”1 and stated the claim for £10,000 was not appropriate in the circumstances and it was also far in excess of what TPO might award. The Adjudicator was satisfied the £500 offer made by the Trustee was sufficient.

The Trustee accepted the Adjudicator’s Opinion.

Ms X did not accept the Adjudicator’s Opinion, and the complaint was passed to me to consider. Mr N provided his further comments on Ms X’s behalf, and these are summarised below.

• It was acknowledged that Ms X failed to remember the likely deadline of the Investment Window. However, section 90A of the Pensions Act 2004 states Trustees should provide members with timely and accurate information to make investment decision. The failure to provide Ms X notification of the Investment Window constitutes maladministration. The Adjudicator’s Opinion improperly shifts responsibility to Ms X as the member.

• Being newly retired on the balance of probabilities, Ms X intended to make changes to her investments, toward lower risk assets and the Scheme’s failure to allow this directly caused financial loss. The proposal by the Scheme to address its mistake through backdating was not appropriate and was not something Ms X would consider.

• The complaint about the use of Mr N’s data should be included in TPO’s review. Such illegality cannot be disregarded and ignoring this element undermines confidence in the fairness of the decision.

• The Scheme has not provided any assurances that Ms X’s pension is being managed safely. The repeated failures demonstrate systemic governance failings. The Pension Regulator’s guidance on trustee boards stresses independence, expertise and conflict-of-interest safeguards. TPO’s dismissal of these concerns contradicts regulatory expectations and fails to protect members’ rights.

1 www.pensions-ombudsman.org.uk/publication/redress-non-financial-injustice

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• A payment for £500 is not adequate given the scale of maladministration and the level of distress suffered. The reasonable estimate for financial loss is £57,237 plus £10,000 for non-financial injustice.

I have considered the comments provided by Mr N, but they do not change the outcome. I agree with the Adjudicator’s Opinion.

Ombudsman’s decision Ms X’s primary complaint is that she did not receive notification of the Investment Window, and as a result she was unable to change her investments in the DC plan. Ms X contends this issue, together with other earlier issues, allowed her to identify a number of weaknesses in the governance of the Scheme. She feels that the subsequent concerns she raised have not been addressed by the Trustee and she has not received the reassurance she requires to provide her with confidence her investments in the Scheme are being managed safely.

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My awards for non-financial injustice will fall into one of the following five categories of awards: nominal, significant, serious, severe and exceptional. The amounts range from nil where I consider distress and inconvenience to be nominal, to £2,000 where I consider it to be severe, or more only where it is considered to be exceptional. I consider that the distress and inconvenience Ms X has experienced falls into the significant category and does not meet the threshold to exceed it. So, I find the existing offer of £500 to be appropriate.

I do not uphold Ms X’s complaint.

Dominic Harris Pensions Ombudsman 13 January 2026

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