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Our Ref: LGR 85/18/364 26 January 2001 833 INDEX |
SUPERANNUATION ACT 1972
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1. I refer to your letter of 4 November 2000 in which you appeal (under regulation 102 of the 1997 regulations) to the Secretary of State for the Environment, Transport and the Regions against the decision of Ms XXX, the Appointed Person in relation to your local government pension scheme (LGPS) dispute with XXX Fund (the fund) administered by XXX council.
2. The Appointed Person upheld the fund’s decision to arrange a transfer of your pension benefits from XXX PLC (the company) without informing you of a downward variation in the transfer value from an earlier quote. You contend the fund mishandled the transfer.
3. The question for decision: The question for the Secretary of State to decide is whether the fund are guilty of maladministration in handling the transfer of your pension rights from the company to the LGPS.
4. Secretary of State’s decision: The Secretary of State finds that the fund are guilty of maladministration although there is no clear evidence that you have suffered financial loss or injustice as a result. However, even if it were shown that you have suffered financial loss or injustice the Secretary of State has no power to award compensation.
5. The Secretary of State upholds your appeal although he cannot order redress or award compensation. His decision replaces that made by the Appointed Person.
6. The Secretary of State’s reasons and the regulatory provisions which he considers apply in your case are set out in the annex to this letter, which forms an integral part of this decision.
7. The Secretary of State is acting judicially and has no power to modify the way the regulatory provisions apply to the facts of the case. Having made his decision he has no power to alter it and his officials cannot discuss the case further or enter into further correspondence with you about the decision. The decision is binding and can only be overturned by a judgement of the High Court or the Pensions Ombudsman.
8. This completes the second stage of the internal dispute resolution procedure. The Pensions Advisory Service (OPAS) is available to assist members and beneficiaries in connection with difficulties which they have failed to resolve. Their address is 11 Belgrave Road, London, SW1V 1RB (telephone number 020 7233 8080).
9. The Pensions Ombudsman may investigate and determine any complaint of maladministrationor any dispute of fact or law in relation to the LGPS made or referred in accordance with the Pension Schemes Act 1993, and has power to award compensation in appropriate circumstances. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 020 7834 9144).
1. The Secretary of State’s powers under regulations 102 and 103 of the 1997 regulations are to reconsider the original disagreement referred to the Appointed Person under regulation 100. This regulation refers to a matter relating to the LGPS, which effectively means whether the provisions governing the LGPS have been correctly applied in the circumstances. There are no provisions to award compensation where claims are made that information has not been provided with regard to the LGPS. Like the Appointed Person the Secretary of State has no powers to direct a local authority to act outside the provisions of the regulations.
2. The Secretary of State has considered all the representations and evidence, and has taken into account the appropriate regulations.
3. The following evidence has been received and taken into account:
(a) from you: letters dated 4 November and 5 December 2000 (with enclosures);
(b) from XXX Council on behalf of the Appointed Person: letter dated 27 November 2000 (with the enclosures copied to you with the Department’s letter of 28 November); and
(c) from the fund: letter dated 28 November (with the enclosures copied to you with the Department’s letter of 29 November 2000).
4. From the evidence submitted the following relevant points have been noted:
(a) your date of birth is 6 October 1940;
(b) in January 1994 you joined the LGPS;
(c) you are an employee of XXX council;
(d) on 17 February 1999 the fund notified you that a transfer value of £82,439 could be paid into the LGPS in respect of your accrued benefits with the company’s pension scheme and that this would purchase a credited membership period of 26 years 222 days;
(e) you gave notice to the fund to accept the transfer;
(f) you received a benefit statement dated 22 February 2000 which indicated a lower level of benefits than you expected; and
(g) the fund explained that the benefits purchased on transfer were lower than those originally estimated.
5. You appealed to the Appointed Person against the fund’s decision to proceed with the transfer without informing you that the transfer value you asked the fund to accept was wrong (leading to a reduction in LGPS benefits purchased). You contend that “I only signed over the transfer of pension on the conditions which were outlined … on the proposed transfer of pension benefits. Had they [been] different I would not have signed as I was also looking at other options at that time”, and that on the strength of the figures quoted you made “financial arrangements which I would not have otherwise done”.
6. The Appointed Person found that “quite clearly an expectation of pension service has arisen with you following the first indications from [the company]”, that the error was compounded when you were not informed of the downward variation, that you “are no worse off” as the fund “received your correct entitlement of benefit based upon actual service”, that the fund were prepared to revoke the transfer but the company “would have to agree to you returning to its pension fund” and that she could not agree to a transfer value at the February 1999 level.
7. You contend that the Appointed Person in reaching her decision has not reconciled the issue, she did not make her decision within the time limit, that you are not sure an independent view was taken, that she did not copy to you all the papers she considered and that the fund’s agency’s handling of the transfer was incompetent.
8. The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. When you requested the fund to accept the transfer value of your accrued benefits with the company’s pension scheme, the 1997 regulations applied. Any question concerning a member’s rights under the LGPS had to be decided by his employer or fund administering authority as appropriate and the member informed as soon as reasonably practicable (regulations 97 and 98). Where a member of the LGPS gave written notice requesting transfer of previously accrued pension rights into an LGPS fund and a fund administrator, such as XXX council, accepted a request (regulation 121), the credited period and the LGPS benefits that would derive from this must be equal in value to the amount transferred (regulation 122) and the fund must notify the member of the period of membership obtained as required by regulation 122(7) and (8).
9. The Secretary of State notes your contentions on the handling of your appeal by the Appointed Person. You question whether the way she considered your appeal was independent and refer to her failure to copy to you correspondence she considered. The Secretary of State also notes that her decision letter contains no references to the statutory provisions on which she relied as required by regulation 101(3)(b) of the 1997 regulations. The Secretary of State has no powers to consider on appeal the way the Appointed Person dealt with your appeal and this question has not therefore been considered. As these issues were not part of the original matter in dispute the Secretary of State has no formal power to investigate them. He notes that under regulation 99(4) of the 1997 regulations an application must not be referred to a person who has previously been involved in the subject matter of the disagreement. He notes that you do not contend that the Appointed Person was involved in the subject matter of the disagreement. The procedure followed by the Appointed Person and the manner she caries out her functions is determined by the fund administrators under regulation 99(7). The Secretary of State is not aware that there is any evidence to show that the Appointed Person breached the fund’s procedures.
10. The Secretary of State has considered all the evidence. It is not disputed that the fund gave you an estimate of the benefits a transfer value would buy, that you agreed to the transfer of your pension benefits from the company, that the fund accepted your request, and that the benefits quote on which you based your decision were greater than those actually purchased in the LGPS. It is not disputed that you were not informed of the difference. The Secretary of State notes the contents of the letter to you of 17 February 1999 from the fund’s agents XXX. He notes that the letter states that the transfer value amount of £82,439 was provided by the company, that based on this the council calculated the “service credit” (credited period) it would buy in the LGPS, that there was a guarantee until 29 April 1999 on the estimate of the value of benefits the transfer would obtain and that there was a proviso saying that “Determination of the benefits to be paid remain the responsibility of the County Finance Officer”. No copy has been provided of your notice to the fund requesting them to accept the transfer value. The Secretary of State notes that when you discovered that your benefits were lower than you expected you raised this with the fund who then informed you of the reduced benefits purchased, but said that you could still decide “whether you wish for the transfer value to be paid back” to the company. He notes that the Appointed Person found that this would require confirmation from the company.
11. The Secretary of State has first dealt with the issue considered by the Appointed Person as to whether the fund should adhere to the credited period and estimate of benefits contained in their letter of 17 February 1999. The Secretary of State notes that under regulation 121(9) “Where a request … is duly made the fund authority may accept the transfer value and credit it to their pension fund”. The Secretary of State takes the view that where the fund accepts a request to a transfer into the LGPS under regulation 122(1) the benefits derived by a member from the transfer must be “equal to the transfer value received” and therefore, the fund could only credit you with LGPS benefits based on the amount received. They cannot base them on an incorrect estimate.
12. The Secretary of State next considered whether the fund was guilty of maladministration. The fund maintain that the value of the benefits bought on transfer were lower then those quoted because they were misinformed by the company. The Secretary of State has been presented with no clear evidence to show where responsibility for the error lay, but he has no jurisdiction over the company in any event. However, he finds that the fund’s letter of 17 February 1999 was, in the event, misleading. While it is clear from this letter that the value of the benefits obtained in the LGPS is an estimate it is not clear whether the credited “service” period is a final figure. The fund appear to have presumed that the transfer value they were quoted was the actual amount they would receive in payment. The Secretary of State takes the view that it may have been expedient to have included a rider explaining that the quoted figures were subject to variation depending on the ultimate transfer value received.
13. Given that the transfer value apparently changed, resulting in the credited period changing, and the fund proceeded with the transfer the Secretary of State takes the view that the fund should have advised you before proceeding with the transfer. Furthermore, they clearly did not comply with the requirements of regulation 98 and 122 in that they did not notify you as soon as reasonably practicable of their decision to award you a period of membership subsequent to the receipt of the transfer value. In the Secretary of State’s view, these failures amount to maladministration.
14. Lastly, the Secretary of State considered whether you suffered financial loss or injustice as a result of the fund’s maladministration. He notes that when you were finally notified by the fund of the amount transferred and credited to you, you were given the option to reverse the transfer. It is not clear however, whether the company would accept this or whether you would recover the full value of your pension benefits with the company before the transfer. You claim that you made financial arrangements based on the figures quoted in the fund’s letter of 17 February 1999. You do not show how the lower level of benefits credited to you in the LGPS from those estimated by the fund caused, or may cause you, financial loss, or whether more favourable options are now closed to you as a result. The Secretary of State takes the view that there is no clear evidence to show whether you suffered financial loss as a result of the fund’s maladministration. He agrees with the Appointed Person in that there is no evidence to show that, despite the maladministration you are any worse off, although you clearly have disappointed expectations. However, even if it were shown that you suffered financial loss or injustice the Secretary of State has no power to order redress that would conflict with the requirements of the regulations, or to award compensation.