Old British Steel Pension Scheme · CAS-49779-G6X1

CAS-49779-G6X1

Ombudsman’s Determination Applicant Mr K

Scheme The Old British Steel Pension Scheme (the OBSPS)

Respondents British Steel Pension Fund Trustee Limited (the Trustee)

Open Trustees

Outcome

Complaint summary

Background information, including submissions from the parties CAS-49779-G6X1

Mr K’s position

Open Trustees position CAS-49779-G6X1 • The early retirement estimate stated that the amounts contained within it were illustrative and could change in the future. So, Mr K should have known that his early retirement pension could change.

• There was no legal obligation on the Trustee to inform Mr K of any potentially favourable changes to the ERFs either in advance of, or after, 1 April 2017.

• The Trustee was not aware of Mr K’s individual circumstances or goals in respect of early retirement. If seeking early retirement directly from the OBSPS was a key consideration when deciding whether to transfer, he should have requested further information from the Trustee.

• Despite being provided with an opportunity to receive an updated CETV illustration, which would likely have resulted in a more generous CETV, Mr K decided to proceed with the original CETV. Therefore, it appeared that Mr K was intent on transferring out of the OBSPS as quickly as possible.

Adjudicator’s Opinion

• The Trustee was not obliged to tell Mr K of any changes to the ERFs.

• This had already been determined by me in Mr G’s complaint. Here I found that it was reasonable that members were not informed of the forthcoming changes. In paragraph 148, I said:-

“I recognise that the Trustee had a duty when exercising its powers to consider the members’ financial interests. But I do not consider that it follows that if the Trustee had alerted members to a potential, but uncertain, future improvement in CETVs and ERFs, it would have discharged that duty.”

• By the time the changes to the ERFs were made, Mr K had already submitted his completed transfer documentation. In completing the transfer documentation, Mr K made it clear that he wanted to accept a CETV in exchange for any benefits he held within the OBSPS. In addition, it was almost eight months since he had requested an early retirement estimate, so the Adjudicator did not agree that the Trustee should have realised that he required more information regarding the ERFs.

• The Adjudicator said that, if early retirement was a significant consideration, it was the responsibility of Mr K, or his IFA, to have ensured that it had an up to date early retirement estimate prior to the transfer. CAS-49779-G6X1 Mr K did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr K provided his further comments which do not change the outcome. He said that:-

• The Pensions Regulator has said that trustees must act in the interests of the beneficiaries. Mr K argued that the Trustee had not done so in his case.

• His complaint differs to Mr G’s complaint because Mr G had transferred out of the OBSPS long before the changes were made to the valuation.

• The Trustee would have known of the changes to the ERFs by the time he transferred out. So, he should have been told of the changes.

• In April 2017, his IFA attempted to speak to the former OBSPS administrator (the Pensions Office) regarding the changes, in particular how they would affect early retirement. However, the Pensions Office refused to engage. He said that he was unable to provide evidence of this call.

• It has checked Mr K’s file and cannot locate any evidence of correspondence or telephone conversations between Mr K’s IFA and the Pensions Office.

• It thinks it is unlikely that the Pensions Office refused to speak to Mr K’s IFA.

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

Ombudsman’s decision

I have previously considered whether the Trustee was obliged to tell members about the changes in ERFs in Mr G’s complaint. In paragraphs 116 and 117, I said:-

“The Trustee is not authorised or regulated to provide advice, therefore it was limited to providing only information and options to categories of members. It could not provide recommendations and advice for individual members (whose circumstances and facts would each have been different). It was for Mr G to consider, on independent advice, if and how any of the changes might have affected him on the basis of information available and circumstances pertaining at the time.

The Trustee was not, and could not have been expected to be, aware of every member’s individual circumstances when making a generic decision. What is best for one member may disadvantage another. The Trustee needed to find a balance between providing too little information and overwhelming members with extensive and comprehensive information. This is a difficult balance to find, especially when it comes to pensions, which are not straightforward in nature, even without an event such as this affecting the OBSPS.” CAS-49779-G6X1 I accept that Mr K’s circumstances differ to those of Mr G. Specifically, that Mr G retired prior to the changes in the ERFs. Mr K’s complaint was distinct as he transferred out of the OBSPS after the changes to the ERFs. However, my findings in Mr G’s Determination still stand. The Trustee could not have been expected to be aware of every member’s individual circumstances. By the time the ERFs had changed, it was over eight months since Mr K had last requested a retirement quotation and over a month since Mr K had returned completed transfer documentation. Consequently, the Trustee would not have known Mr K was still contemplating early retirement and so I would not have expected it to provide an update on the ERFs.

Mr K has argued that the Trustee failed to act in his best interests, I do not find this argument compelling. The Trustee cannot advise, or be seen to advise, whether the transfer was in Mr K’s best financial interests as it is not regulated to provide such advice. Had the Trustee offered Mr K an option to abort his transfer and retire early, the Trustee could have been accused of making a recommendation it was not regulated to make.

Furthermore, by the time the Trustee decided to update the ERFs, Mr K had already submitted completed transfer paperwork. The Trustee had all it needed to complete the transfer at this point, so I do not find it reasonable for Mr K to have expected to be updated on ERFs.

Mr K has complained that the Pensions Office refused to engage with his IFA; so, he was not given the opportunity to assess what the new ERFs would mean for him. He has been unable to provide evidence of his IFA’s correspondence being refused. In response to this element of the complaint, Open Trustees has said that it holds nothing that suggests the IFA attempted to make contact. With this limited information, I cannot be satisfied that there was maladministration on the part of the Trustee.

I do not uphold Mr K’s complaint.

Anthony Arter

Pensions Ombudsman 18 March 2022 CAS-49779-G6X1 Appendix One Paragraphs 32 to 51 from Determination PO-18982

(i) “Relationship between ERFs and member contributions to the OBSPS

Benefits paid from the OBSPS to members who retire from deferred status are calculated on the basis of the member’s Final Pensionable Earnings and the number of years of his or her Pensionable Service, as set out in Rule 14 of the OBSPS Rules (a relevant extract of which is included in Appendix 1).

(ii) Relationship between ERFs and the OBSPS’ funding position CAS-49779-G6X1 (iii) Relationship between ERFs and the OBSPS’ investment strategy CAS-49779-G6X1 CAS-49779-G6X1 CAS-49779-G6X1 Appendix Two Paragraphs 38 to 68 from Determination PO-18762

(i) Relationship between CETVs and the OBSPS’ investment strategy

Regulation 2 of The Occupational Pension Schemes (Investment) Regulations 2005 (the Investment Regulations), (see Appendix 4), requires trustees to create and maintain a SIP, reviewing it at least once every three years, and without delay after a significant change in investment policy. This regulation also sets out that the trustees must obtain and consider appropriate advice on what the SIP must cover. CAS-49779-G6X1 CAS-49779-G6X1

(ii) Amendment of the CETV calculation basis

“19. The assumptions must be chosen with the aim of leading to a best estimate of the ICE. This is a best estimate of the amount of money needed at the effective date of the calculation which, if invested by the scheme, would be just sufficient to provide the benefits. However, trustees should recognise that 'best estimate' is not a precise concept and they will often need to be pragmatic and accept choices which seem to them reasonable in the light of the information and advice they have obtained.”

“21. Trustees must have regard to their investment strategy when choosing assumptions. This includes the appropriate investment returns to be expected, which in turn will influence the choice of interest rates with which future expected cash flows are discounted.” CAS-49779-G6X1 “23. Trustees should make evidence-based objective decisions in relation to matters that will have a material effect. Of course, evidence in the conventional sense is not available on the future. In this context what we mean by evidence is facts about the past, and opinions about the future based on those facts, which can be objectively used by the trustees to make judgements about the likely course of future events. This evidence can take a variety of forms, including:

• past history of investment returns from various asset classes and the relationships between them; • published mortality tables; • a scheme's own experience to the extent it is statistically reliable; • published statistics on demographic issues; • the opinions of recognised experts; and • the output of suitable stochastic models as advised by the scheme actuary.” CAS-49779-G6X1

(iii) Option to await a new CETV calculated using the post April 2017 calculation basis CAS-49779-G6X1

“I am writing to you about your decision to transfer out your [OBSPS] benefits to another registered pension arrangement by means of the [OBSPS] paying a Cash Equivalent Transfer (“transfer”).

When an OBSPS member initially requests a transfer, the Pensions Office calculates the individual's transfer value using factors set by the Trustee after taking advice from the [OBSPS] Actuary. These factors reflect the expected cost of providing the member's benefits within the OBSPS, calculated on a best estimate basis. The actuarial basis for calculating transfer values was last updated on 1 October 2016.

The assumptions and methodology used to calculate transfer values must satisfy certain regulatory requirements and have regard to the [OBSPS’] investment strategy. The Trustee Chairman’s letter to [OBSPS] members referred to recent developments in connection with the future of the [OBSPS]. In recognition of those developments the Trustee is adopting a lower-risk investment strategy.

The transfer value basis will therefore be changed to reflect the [OBSPS] revised investment strategy and the overall effect of this change is expected to result in higher transfer values in most cases. It is currently expected that increases in transfer values will only apply for members more than 2 years from the [OBSPS] Normal Pension Age (generally age 65), and that the increases become more significant the further away a member’s age is from Normal Pension Age.

The transfer value which you accepted was calculated on the current basis; applying the revised factors in most cases is expected to result in a higher value (although we cannot give a guarantee to that effect). You can of course proceed with your transfer on the basis quoted; however, you may wish to reconsider your decision taking into account the above information. If you decide to proceed with your request to transfer then please indicate in the box below and return this letter to the Pensions Office in the pre-paid envelope.

Under statutory provisions a transfer value is required to be provided on request to a scheme member once in any 12 month period. Due to the unusual circumstances outlined above, if you decide not to proceed with your transfer request, the Trustee has agreed that you will automatically be provided with an updated transfer value statement using the revised factors when these are available. CAS-49779-G6X1 Allowing time for the necessary system changes following the closure of the [OBSPS] to future accrual with effect from 31 March 2017 for [OBSPS] employee members, it is anticipated that revised transfer value quotations will be available from the end of May 2017.

You may wish to discuss the contents of this letter with an Independent Financial Adviser. Pensions Office staff cannot give advice.

I enclose a copy of this letter for your records, or for you to pass to your Independent Financial Adviser.”

“(please tick one box below to indicate your decision)

I wish to proceed with transferring-out my [OBSPS] benefits.

I understand that the Trustee’s decision to change the transfer value basis from 1 April 2017 is likely to result in an increase to future transfer values payable by the Scheme and that any increase is not reflected in the transfer value I have accepted.

I do not wish to proceed with transferring-out my [OBSPS] benefits at this time.

I understand that the Pensions Office will send me an updated transfer value quotation after the change in the transfer value basis takes effect and the Pensions Office systems are able to process such requests (likely to be towards the end of May 2017) and I understand that it is not guaranteed that the updated transfer value quotation will be greater than the current quotation.” [original emphasis]

(iv) Completion of the transfer using the pre-1 April 2017 calculation basis CAS-49779-G6X1