Teachers Pension Scheme · CAS-112538-T3J7

CAS-112538-T3J7

Ombudsman’s Determination Applicant Dr D

Scheme Teachers’ Pension Scheme (the Scheme)

Respondent Teachers’ Pensions (TP)

Outcome

Complaint Summary

Background information, including submissions from the parties The sequence of events is not in dispute, so I have only set out the main points. I acknowledge there were other exchanges of information between all the parties.

In 1997, Dr D joined the Scheme when he commenced employment with university 1. This was on a final salary basis with a normal pension age of 60 years.

In 2004, Dr D applied to purchase six years and 225 days of extra pensionable service, called past added years (PAY), in the Scheme using Method A. He agreed to pay an extra 9% of his salary from 2005 to 2020, when he would reach age 60. With his completed application form, he sent a cover note which said:

“Please find my attached form based on an assumption I will try to retire at age 60. Wishful thinking?” 1 CAS-112538-T3J7 When Dr D received the blank application form, he would have received leaflet 376 which said:

“Leaving pensionable employment

If you have not finished paying for your election under Method A and you leave pensionable employment and do not return within one month we will give you a paid-up credit, i.e. the amount of extra years paid for up to the date of leaving.

You may have the option to pay for the remaining extra years in a single sum. To do this, you must write to us within three months of leaving pensionable employment.”

After TP received Dr D’s application form, it replied to him later in 2004 confirming his PAY election. Its cover letter said:

“If you take up another appointment in pensionable service after a break in service of less than one month you should show this letter to your new employer so that the correct contributions can be collected with the minimum of delay. However, if you have a break in service of more than one month or change from pensionable to non-pensionable service your election will be terminated.”

Its letter included notes for PAY elections which said:

“Method A

If payment of Method A contributions has not been completed on the award of pension at age 60 or later, the teacher has the option to pay off the additional contributions outstanding in a capital sum which may be deducted from retirement lump sum. This option must be exercised after application for pension but before the date on which it is paid.”

In 2007, Dr D left pensionable employment with university 1 and became a deferred member of the Scheme. Although he was not informed at this time, his PAY election ended as a result.

In 2017, Dr D re-joined the Scheme when he commenced employment with university 2. However, he joined the career average revalued earnings section of the Scheme, with a normal pension age of 66 years.

In 2021 and 2023, Dr D’s financial adviser asked TP for a retirement illustration showing his accrued pension benefits. In response, on each occasion TP provided a standard benefit statement, which gave confirmation that the benefits quoted included the six years 225 days of PAY he had agreed to purchase.

Later in 2023, Dr D retired from his employment at university 2. TP subsequently received a retirement application form from him. TP explained that, in line with its normal procedures, it reviewed his file. This caused it to calculate how much PAY 2 CAS-112538-T3J7 he had paid for. His actual PAY contributions amounted to two years and four months, which had only purchased an additional one year and 26 days of PAY or paid-up credit (PUC). This was added to his pensionable service and included in the statement of retirement benefits sent to him.

Dr D then complained to TP that his statement of retirement benefits did not include the higher amount of PAY quoted in his 2021 and 2023 statements, so his lump sum and annual pension were lower than in previous statements.

Summary of TP’s position Dr D was told when his PAY application was accepted, that it would end if he left pensionable employment before the proposed end date.

Dr D did not tell TP when he left pensionable employment in 2007.

The 2021 and 2023 statements were not guaranteed and were accompanied by a warning that the PAY would be purchased proportionately:

“Past Added Years (PAY)

All PAY that you have already paid for in full, including any PAY for which you are still purchasing by monthly deductions, will be included in your estimate. However, if at retirement you have not fully paid for your PAY your benefits will be less. At retirement, or indeed upon leaving pensionable employment, you will have the option to take a paid-up credit for the amount of PAY you have paid for at the date of leaving/retiring. Alternatively, you can pay the outstanding contributions to enable the full amount of PAY to be credited. If you should leave pensionable employment and have a PAY election that has not been concluded please contact us.”

Dr D did not contact it regarding his outstanding PAY election when he left pensionable employment in 2007 or when he retired.

It had a policy not to recalculate benefits taking into account actual as opposed to agreed PAY contributions in standard benefit statements. It would only recalculate these statements when a member applied for payment of their retirement benefits.

So, it concluded that Dr D should have been aware he had not actually made the full 15 years of PAY contributions he had agreed to in 2004. As such, he had not completed the full PAY election. So, he should not have expected to get the full amount of PAY he had elected for despite getting the 2021 and 2023 statements showing that amount of PAY.

There was no maladministration and it did not cause Dr D any injustice.

3 CAS-112538-T3J7 Summary of Dr D’s position He did not receive any information about his PAY election from TP after the initial PAY election had been accepted.

He and his financial adviser relied on the 2021 and 2023 statements when planning his retirement: he chose to retire in 2023 as a result. These statements were misleading as they included the full PAY amount he had originally applied for and not the reduced proportionate amount.

He also felt:

“If I had not retired early, I would have earned a salary of around £54,000 per year for at least 2 years which would have put me in a good position. I am in poor health with Diabetes and COPD and now looking for work at 64 years old which is unlikely to pay anything like £54,000 per annum. I am fit enough to work as a lecturer, so this is a disastrous turn of events for me, none of which is of my making.”

Adjudicator’s Opinion

While the error was not the fault of Dr D, he had a responsibility to check the accuracy of his pension statements. A warning on each of the statements specifically reminded him of this responsibility. The statement showed such significant errors it should have been clear to him there was a problem. He should 4 CAS-112538-T3J7 not have based a decision to retire on this and other statements without raising them with TP. Had he done so, the mistakes would likely have been identified and corrected.

Dr D said he decided to retire in 2023 rather than in 2024 by relying on incorrect information, specifically the incorrect statements. The Adjudicator thought this decision was not solely caused by the misinformation.

In the Adjudicator's view, on the balance of probabilities, Dr D would not have done anything differently if the correct pension benefits had been given to him in 2023.

The difference between the incorrect projected pension benefit amounts in the statements and the pension benefits put into payment is not Dr D’s financial loss, as he was never entitled to the higher amount. There is no dispute the statements’ figures were incorrect. However, the Adjudicator was sympathetic to his upset and disappointment when he discovered the statements were wrong. However, the Adjudicator explained the difference was a loss of expectation, not an actual financial loss.

In the Adjudicator’s view, the provision of incorrect information amounted to maladministration. Although the calculation error occurred only once, in 2021, this calculation was the basis for all subsequent pension benefits projections until the error was discovered in 2023 when Dr D retired. This caused him significant distress and inconvenience which should be recognised by TP. So, an award of £500 should be paid to him.

TP did not object to the Adjudicator’s Opinion. Dr D did not accept it, so his complaint was passed to me to consider. Both parties sent further submissions, which are summarised below.

Dr D’s further submissions His grievance is not with the length of service TP recorded but with the estimates of his retirement tax-free lump sum and yearly pension. The misinformation was not in his actual length of service but in the amount of PAY he had paid for versus what had been assumed. This discrepancy led to the incorrect retirement benefit estimates.

TP should have known that a retirement quotation given to his financial adviser would have led to it giving him advice. He trusted TP so he did not suspect anything was wrong or needed checking.

He had already resigned from university 2 based on the incorrect estimates. TP only discovered its error about two weeks before he was due to be paid his retirement benefits. So, it was too late for him to do anything about the error. If TP had found its error three or four weeks earlier, he might have been able to keep his job and work for two more years to make up the apparent difference in retirement benefits between the wrong estimates and the benefits he was due to get. 5 CAS-112538-T3J7 TP should fix its processes rather than leave retirees to find errors in estimates. It should be responsible for the quality and accuracy of the information in its estimates and should update its IT systems.

His health conditions are mild and one has gone into remission. So, he is fairly healthy and could have continued working until 2024.

TP’s further submissions Dr D is getting the retirement benefits to which he is entitled.

There was sufficient information for Dr D to know the amount of PAY he elected to purchase. The information he was given at the start of the election was enough to identify that it had not been concluded in full.

It was not reasonable for Dr D to have relied on the benefit statements as he should have known that he had not purchased the full PAY he originally elected.

Dr D could have contacted TP at any time before his retirement, as guided on the benefit statement, for a PUC to be calculated.

Ombudsman’s Determination I have considered the additional comments made by both parties. They do not change the outcome. Subject as set out below, I agree with the Adjudicator’s Opinion.

Dr D is only entitled to receive pension benefits from the Scheme, calculated correctly and according to the Scheme’s Rules. I find that he is receiving his correct retirement benefits. However, he argues he relied on the incorrect information provided in the statements to retire and if he had been given the correct figures, his decision to retire would have been different. Having retired, he was unable to make good the shortfall in his pension.

I may direct TP to honour an incorrect statement if it was provided in the expectation it would be relied on and Dr D had relied on it as expected and incurred liability or suffered a loss as a result (change of position) in circumstances making it unconscionable for TP not to be held to the incorrect statement (estoppel).

There is no dispute that Dr D was given incorrect figures in the statements he received in that the estimates of his tax-free lump sum and yearly pension was based on an assumption that he had paid his contracted PAY in full rather than on the actual PAY he had paid. However, I find that there was sufficient information in the notes provided with the statements for it to be clear that the figures might be incorrect in respect of his PAY and explaining the assumptions made. In particular, I note the statement that: “all PAY that you have already paid for in full, including any PAY for which you are still purchasing by monthly deductions, will be included in

6 CAS-112538-T3J7 your estimate. However, if at retirement you have not fully paid for your PAY your benefits will be less. At retirement, or indeed upon leaving pensionable employment, you will have the option to take a paid-up credit for the amount of PAY you have paid for at the date of leaving/retiring. Alternatively, you can pay the outstanding contributions to enable the full amount of PAY to be credited. If you should leave pensionable employment and have a PAY election that has not been concluded please contact us” (emphasis added).

Having regard to the above, the statements were clearly not unequivocal statements of the benefits that would be payable on which he was reasonably expected to rely in making decisions, such as deciding to retire, and I see no basis for a claim for any financial loss. The figures were stated to be estimates and the notes explained how they might be overstated.

I also find that it was not reasonable for Dr D to have relied on the 2021 and 2023 statements in deciding to retire. Dr D should have known he had not made all the PAY contributions he had agreed to. So, he should have realised the figures in the statements were overstated. The statements had a warning that if a Member at retirement had not fully paid for his PAY, their benefits would be reduced.

For the reasons above, I find there is no basis for me to direct TP to pay Dr D a pension of the overstated amount in those statements.

In conclusion, I am satisfied that Dr D is in receipt of his correctly calculated pension benefits in line with the Scheme’s Rules. TP is not required to pay his pension at the higher rate quoted in the 2021 and 2023 statements, nor pay him compensation in respect of any loss incurred in reliance on those statements.

Non-financial Injustice While I do not consider that Dr D has suffered a financial loss, I have considered whether it is maladministration for TP to provide incorrect figures for PAY benefits in annual benefit statements where the PAY election has terminated, even with the warnings provided. Given that the purpose of issuing benefit statements is to provide a reliable estimate of the benefits payable under the scheme, that once a PAY election has terminated the proportion of added pensionable service is fixed and should be included correctly in the scheme’s administration systems and factored into the estimates provided in the annual benefit statements and that the member will not be able to estimate his actual PAY even where he knows he did not pay the agreed PAY in full, I find that failing to provide correct estimates based on completed PAY where a PAY election is terminated is maladministration.

Essentially, TP has the information to give correct estimates and should do so rather than knowingly issuing incorrect estimates with warnings. The policy described at paragraph 19 above is maladministration where the PAY election has terminated as it results in members unnecessarily being provided with incorrect estimates when

7 CAS-112538-T3J7 correct estimates could and should be provided. I find TP’s maladministration caused Dr D significant non-financial injustice.

Awards for non-financial injustice are not intended to be corrective or punitive, but a recognition of the distress and inconvenience suffered. I find that an award of £500 is appropriate given the circumstances of this case.

I partly uphold Dr D’s complaint.

Directions Within 28 days of the date of this Determination, TP shall pay Dr D £500 for his significant distress and inconvenience.

Camilla Barry Deputy Pensions Ombudsman 9 January 2026

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