Pension And Life Assurance Plan Ng Bailey · CAS-53915-F5N4

CAS-53915-F5N4

Ombudsman’s Determination Applicant Mr Y

Scheme The Pension And Life Assurance Plan of NG Bailey (the Plan)

Respondent WPS Trustee Services Limited (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties On 1 December 1995, Mr Y joined the Plan and started accruing benefits within the Plan (the Accrued Benefits). In September 1996, Mr Y transferred his benefits from another pension arrangement into the Plan (the Transferred in Benefits). Mr Y became a deferred member of the Plan on 31 May 2010.

On 11 March 2019, following Mr Y’s request, KPMG, the Plan’s administrator (the Administrator), sent Mr Y a pension benefit statement (the March 2019 Statement).

On 25 March 2019, following receipt of the March 2019 Statement, Mr Y emailed the Administrator with some queries. As part of his queries, Mr Y asked what ERF would be applied to his Accrued Benefits and what ERF would be applied to his Transferred in Benefits.

On 27 March 2019, the Administrator replied to Mr Y. It provided a table detailing the ERFs applicable to the different sections of the Plan.1 The Administrator explained that the factors were subject to change and were provided by the Plan Actuary (the Actuary) based on the market conditions at the date of retirement.

1 This table is detailed in Appendix 1. 1 CAS-53915-F5N4 The Administrator also said:

“Your transferred-in pension of £26,101.92 is fixed at 9 June 2028, if you were to claim the benefits before this date they would be reduced in Iine with the Fixed early retirement factors outlined [in the table set out in the Appendix].”

Subsequently, between 27 March 2019 and 29 November 2019, there were further exchanges between Mr Y and the Administrator concerning the ERF that would be applied to the Transferred in Benefits. During this period:-

• Mr Y informed the Administrator that he was previously told the ERF for the Transferred in Benefits would be the same as the ERF for the Accrued Benefits. However, the figures it had provided (see Appendix 1) showed that the ERF for the Transferred in Benefits was worse than the ERF for the Accrued Benefits.

• The Administrator asked Mr Y to provide any documentation he had previously received advising that the ERF applied to the Transferred in Benefits would be the same as the ERF for the Accrued Benefits. It explained that it had been administering the Plan using the Plan Rules (the Rules) it had been provided by the former administrators, which indicated an ERF to be applied to fixed benefits such as the Transferred in Benefits.

• Mr Y confirmed that he did not have any documentary evidence that he was previously informed that the same ERF would apply to the Transferred in Benefits as those applied to the Accrued Benefits. However, he had always been told that his Transferred in Benefits would be treated the same as the Accrued Benefits and would have the same ERF.

• The Administrator confirmed that Mr Y’s Transferred in Benefits had a separate ERF to Accrued Benefits. After an extensive search of its records, it found no documentary evidence to suggest that the Transferred in Benefits should be treated differently to other transfers into the Plan.

• Mr Y requested and was sent a copy of the Rules. The Administrator informed Mr Y of the applicable Rule that prescribes how the ERF for the Transferred in Benefits should be calculated.2

2 The Administrator quoted an extract from Rule 10.2 of the General Rules. It also explained that Rule 4.1 of Part 2 of the Rules was not applicable to Mr Y because the Transferred in Benefits provided a fixed pension and no credited pensionable service was awarded in respect of the Transferred in Benefits. An extract of Rule 10.2 is detailed in Appendix 2. 2 CAS-53915-F5N4 • The basis of his complaint was that at no point was he informed that a significant portion of his benefits in the Plan would attract a different and less generous ERF. So, he was unable to make informed decisions concerning his pension provision.

• He had received annual statements and trustee reports for many years, and none stated that there could be any difference in the ERFs for the Transferred in Benefits.

• The Administrator had recently taken legal advice which highlighted a rule that stated there “could” be a different ERF for the Transferred in Benefits. He was not previously made aware of this.

• If that rule was to be enforced and different ERFs were applied to different element of benefits, members of the Plan should have been informed of the actual rates to be applied, so they can make informed decisions.

• The financial effect of the factors on the Plan overall.

• Assumptions relating to the expected cost of providing pensions to members.

• Financial market conditions.

• Any restrictions on the factors which can be set, for example, restrictions set out in the Rules.

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• The ERFs for the Plan had been advised in writing many times over the years. He had always been led to understand that the Transferred in Benefits were part of the Plan so would attract the same benefits, fees and penalties as the rest of the Plan.

• Over the period of the last 25 years, he had been advised of changes to the Plan, but he was not informed that the Transferred in Benefits would be treated differently from the rest of the Plan. He had queried this with the Plan’s previous administrator and was told that the Transferred in Benefits would be treated the same as the rest of his benefits in the Plan.

• It was only when he received the November 2019 Quotation that he became aware that a 7% per annum ERF would be applied to the Transferred in Benefits and not the 3% per annum ERF that he was previously informed would be applied, should he retire earlier than his NRD.

• As the Transferred in Benefits contributed to more than 50% of his prospective pension, the difference between 3% and 7% per annum ERF to be applied to those benefits was concerning and would significantly impact upon his ability to retire as planned.

• His complaint was that he could not possibly have made suitable and informed choices regarding his pension provision and contributions if he was not given accurate pension information to work with in the first place.

• During his employment of 38 years and 10 months he did not make any additional voluntary contributions (AVCs) or increase his pension contributions to ensure that he had a suitable income in retirement, as he did not believe he needed to.

• He had complained to the Administrator about this issue and was informed by the Administrator that it was applying the Rules.

• He subsequently requested a copy of the Rules. The Rules clearly stated that the ERF for early retirement is set at 0.25% per month which equalled to 3% per annum. He highlighted this to the Administrator and the Administrator informed him that it would seek legal advice.

• Subsequently, the Administrator referenced Rule 10.2 in the General Rules. The wording of this Rule appears to state that a transfer in value could be treated differently to benefits accrued in the Plan. This did not address his complaint which was that he had never been informed of this alteration in terms. So, he had

4 CAS-53915-F5N4 been prevented from making suitable arrangements to ensure he had a suitable pension in retirement.

• He understood the need to update the Rules as required to ensure their suitability and fairness to all its members and ensure it remained legal and sustainable. However, he felt it was deeply unfair to make substantial changes to pension policies and not inform those who would be affected by such changes. He did not believe it was lawful or even fair and reasonable for members to only be informed of changes to their pensions that would affect them, so close to the point of their intended retirement.

• It had obtained professional advice and considered his complaint in detail. It concluded that his complaint should not be upheld and that the ERF that should be applied to the Transferred in Benefits was 7% per annum and not the 3% per annum that is applicable to the Accrued Benefits.

• The main reason for this decision was that Mr Y was a deferred member of the Plan and his benefits were governed by the Rules. The Rules relevant to him provided, in summary, that the ERF to be applied to his pensionable service shall not be greater than 0.25% for every month prior to normal retirement, that is 3% per annum.

• Pensionable service is a defined term under the Rules and it only includes transferred in service as agreed by the Trustee at the request of the employer. Where transferred in service is not included as pensionable service, an additional pension in respect of that transfer shall be provided as determined by the Trustee, acting on the advice of the Actuary.

• For the avoidance of doubt, this additional pension includes the ERF which is 7% per annum.

• There was no evidence to suggest that Mr Y’s Transferred in Benefits were to be treated as pensionable service. This meant that the 3% per annum reduction should not be applied to his Transferred in Benefits.

Summary of Mr Y’s position

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3 Mr Y provided a copy of this transfer statement to The Pensions Ombudsman.

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Adjudicator’s Opinion

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4 This was in accordance with Rule 10.2 Part 1 of the Scheme Rules. 5 The Trustee said that this can be seen replicated in the table which was communicated to Mr Y on 27 March 2019. This table is detailed in Appendix 1. 11 CAS-53915-F5N4

Ombudsman’s decision

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I do not uphold Mr Y’s complaint.

Anthony Arter CBE

Deputy Pensions Ombudsman

30 July 2024

13 CAS-53915-F5N4 Appendix 1 Table detailing the early retirement factors applicable to Mr Y’s Accrued and Transferred in Benefits as stated in the Administrator’s email of 27 March 2019.

Years CARPS Final Early Salary Fixed

0 1 1 1

1 0.938 0.97 0.924

2 0.882 0.94 0.854

3 0.83 0.91 0.791

4 0.782 0.88 0.733

5 0.738 0.85 0.68

6 0.698 0.82 0.632

7 0.661 0.79 0.588

8 0.626 0.76 0.548

9 0.594 0.73 0.51

10 0.564 0.70 0.476

14 CAS-53915-F5N4 Appendix 2 Relevant Sections of the Definitive Trust Deed and Rules of the Pension and Life Assurance Plan of NG Bailey dated 2009.

“…

PART 1 – GENERAL RULES APPLICABLE TO ALL MEMBERS

…

Rule 10 (Part 1): Retirement at Normal Retirement Date

…

10.2 Subject to the limit specified in Rule 10.4 below, the annual rate of pension payable to a Pensioner under Rule 10.1 shall be the aggregate of the respective pensions calculated in accordance with the provisions applicable to each Benefits Section in which the Member has Pensionable Service (which, for the avoidance of doubt, may be calculated in part by reference to Rule 11 (retirement before Normal Retirement Date) or Rule 12 (retirement after Normal Retirement Date) as appropriate in the event that a member has accrued benefits in more than one Benefits Section and thereby may have different applicable Normal Retirement Dates) PROVIDED THAT, in respect of a Member for whom a transfer value has been received and accepted by the Scheme and in respect of which there is no Credited Pensionable Service, an additional pension shall be provided which in the opinion of the Trustees acting on the advice of the Actuary is purchased by such transfer value and shall in respect of unmarried male Members and female Members be guaranteed for a period not exceeding 5 years in accordance with Rule 10.3 below. In all cases the pension shall be subject to the provisions of Rule 10.4 below and the limits of Appendix 2.

…

Rule 13 (Part 1): Withdrawal from Service Before Normal Retirement Date

…

13.5 Where a Deferred Pensioner:

13.5.1 has attained Minimum Retirement Age, or

13.5.2 suffers from Incapacity at a date before attaining Normal Retirement Date

he may, by written notice to the Trustees request the payment of an immediate pension instead of the deferred pension. The immediate

15 CAS-53915-F5N4 pension shall be discounted or increased (for early or late retirement, as the case may be) at such a rate as is set out in the relevant Rule of Part 2, Part 3 or Part 4 as appropriate, provided that this option shall not be exercised if the level of benefits prospectively payable to the Deferred Pensioner at GMP Payment Age would be less than that required under Appendix 1.

…

Rule 4 (Part 2): Retirement before Normal Retirement Date

4.1 The rate of discount applicable to the immediate pension payable to a Pensioner in relation to his Membership of this Final Salary Section shall be such a rate (not exceeding the rate recommended as appropriate by the Actuary) as the Trustees may decide at the date such pension commences provided that:

(i) for a Barber Member the discount rate shall be applied by reference to the period by which the Barber Member’s actual retirement date precedes the age shown in the following table for the appropriate period of Pensionable Service

PENSIONABLE SERVICE PERIOD MEN WOMEN

Up to 17 May 1990 63 60

17 May 1990 to 31 December 1994 60 60

From 1 January 1995 63 63

(ii) for any Member, the discount rate applied shall not be greater than 0.25% for every month of early payment prior to Normal Retirement Date (or, if appropriate, the age specified in the table contained in paragraph (i) above), for Pensionable Service to 1 March 2008.”

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