Ici Specialty Chemicals Pension Fund · CAS-54214-V7J4

CAS-54214-V7J4

Ombudsman’s Determination Applicant Mr N

Scheme ICI Specialty Chemicals Pension Fund (the Fund)

Respondents ICI Specialty Chemicals Pensions Trustee Limited (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties Mr N commenced employment with National Starch & Chemicals Limited (NSCL) in December 1986 and joined the National Starch & Chemical Pension Scheme (NCS) in January 1987. NSCL was owned by Unilever.

In August 1990, a decision was made to integrate the Unilever Superannuation Fund (USF) with NCS. Consequently, Mr N received an invitation to join the USF. He authorised the transfer of his benefits from the NCS into the USF on 31 August 1990.

In 1998, Imperial Chemical Industries (ICI) acquired several businesses from Unilever which led to the creation of the Fund. The provisions of the Fund allowed employees to transfer benefits accrued in the USF to the Fund. The Fund was administered by ICI.

On 20 February 1998, Mr N joined the Fund. He was provided with a “Pension Pack” by ICI. The pack included a member’s booklet which contained information about the

1 CAS-54214-V7J4 retirement benefits payable from the Fund, how these were calculated and the conditions for payment. It also included a transfer option form.

On 24 March 1998, Mr N signed the transfer option form and authorised the transfer of his benefits from the USF to the Fund.

On 1 July 2000, Mr N became a deferred member of the Fund after being made redundant by NSCL. Following this, on 26 July 2000, ICI provided Mr N with a statement confirming his pension entitlement and benefit options.

In 2005, ICI published its annual newsletter entitled “Pensions Review” which, among other things, explained the early retirement option. It stated that:

“All members of the Fund can currently choose to retire from age 50. This is the earliest age at which you may take your pension unless you are retiring due to incapacity”.

On 11 December 2016, Mr N reached age 60 and was entitled to unreduced early retirement but says he was unaware of this.

On 29 July 2019, the new Fund administrator, Lane Clark & Peacock LLP (LCP), provided Mr N with a retirement pack and covering letter. The retirement pack contained information about Mr N’s deferred benefits, if he were to take them from 1 July 2019, and the options available to him at that date.

On 25 October 2019, Mr N contacted LCP, and asked why he had not been informed of his entitlement to retire at age 60 with unreduced benefits. LCP informed him that it would raise this with the previous administrator, ICI, and the Trustee.

On 27 October 2019, Mr N wrote to LCP to request that his retirement benefits be put into payment.

On 18 November 2019, LCP wrote to Mr N to confirm that it had accepted his request and it would arrange for his retirement benefits to be paid with effect from 1 July 2019. LCP also provided a response to the enquiry Mr N raised on 25 October 2019. It stated that: -

• As a trustee of a defined benefit scheme and in accordance with legislation, the Trustee was required to issue a retirement illustration six months before a member’s Normal Retirement Age (NRA) which for Mr N was age 65.

• Information about early retirement (reduced or partially reduced) from age 60 was provided in the Fund member booklet issued in 1998 alongside the “Pension Pack”.

2 CAS-54214-V7J4 • When LCP were appointed as Fund administrators, the Trustee made the decision to extend its member communications. Its priority was to remind members of their option to receive an early unreduced retirement pension from age 60, as well as other options such as transferring out. That is why LCP wrote to Mr N on 29 July 2019.

On 11 January 2020, Mr N wrote to LCP raising a complaint as he was dissatisfied with LCP’s response.

On 24 February 2020, LCP wrote to Mr N, on behalf of the Trustee, to provide a response to his complaint. Mr N’s complaint was not upheld. LCP explained its reasons and also enclosed the member booklet and the “option form” Mr N had signed when transferring his benefits into the Fund. This form stated that upon transferring into the Fund, Mr N would be provided with benefits in accordance with the terms of the information pack issued in 1998. LCP also explained that Mr N’s complaint hadn’t been made under the Fund’s usual Internal Dispute Resolution Procedure (IDRP) and so, if he was dissatisfied with the response, the Trustee had given him the option to have his case considered at Stage 2 of the IDRP without the need for the complaint to be considered at Stage 1.

On 21 March 2020, Mr N requested that his complaint be considered under Stage 2 of the Funds IDRP.

Summary of Mr N’s position

The Trustee had failed to fulfil the duties it owed him under trust law.

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4 CAS-54214-V7J4 Summary of the Trustee’s position

When Mr N joined the Fund, the Trustee fulfilled its duties by providing the member booklet in accordance with the Occupational Pension Schemes (Disclosure of information) Regulations 1996. This booklet informed him about the retirement benefits payable under the Fund and the conditions for payment.

When Mr N reached age 60 in December 2016, the Occupational and Personal Pension Schemes (Disclosure of information) Regulations 2013 (the 2013 Disclosure Regulations) were in force.

The Trustee is required to act in line with the powers granted by the Fund rules and applicable laws. It was required to pay the retirement benefits Mr N was entitled to under the 2003 Rules. The Trustee could not provide benefits that fell outside of this scope otherwise it would be acting outside of its powers, which could lead to tax penalties for both Mr N and the Trustee.

5 CAS-54214-V7J4 While there is no single law or Fund provision that prohibits Mr N from being able to backdate his early retirement request, it is the absence of such a rule that prevents the Trustee from permitting his request. The Trustee cannot allow him to exercise options not available under the Fund rules.

The Trustee now writes to deferred members who are over the age of 55 to provide them with information about the value of their retirement benefits and their options for taking them. This does not mean the information given in the past was inadequate. The Trustee is not required to provide this information and has previously used the member newsletter, the member booklet, and the Fund website to generically highlight early retirement options. The fact Mr N did not receive a similar letter in 2016 did not amount to a failure on the part of the Trustee to fulfil its obligations under the statutory disclosure regulation, the Fund rules, and the trust law duties it owed.

The level of information provided by the Trustee did not breach the trust law duties it owed Mr N. The 2013 Disclosure Regulations allowed for Mr N to request a range of information. He could have requested additional information in relation to his retirement benefits throughout the period of his deferred membership but choose not to do so.

Adjudicator’s Opinion

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Mr N did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider.

Mr N provided his further comments which do not change the outcome. In summary he said:

• The Trustee ought to have made more of an effort to inform him of his option to retire early and receive an unreduced pension at age 60. A simple personalised letter would have been sufficient.

• Over time people can forget the benefit options they are entitled to and therefore should be reminded when they have an option that can be exercised. So, even if there was no statutory obligation for the Trustee to bring his early retirement option to his attention at age 60, The Trustee should have still written to him to satisfy its duty to “act in the best interest of the beneficiaries”. It is unlikely that the original Trustee would have created the early retirement option for it to only be paid to members who are aware of the option or to those that remember it in real- time.

• If he had been reminded that he could take his pension benefits without reduction from age 60, then he undoubtedly would have done so. He believed most people would have made the same decision.

8 CAS-54214-V7J4 • He is being treated unfairly in comparison to other beneficiaries of the Fund. The class of beneficiaries who will reach their enhanced retirement age after the 2019 policy change will be better positioned to make an informed decision about their retirement. If the Trustee now believes that it should communicate with deferred members to give them information in good time to make the right decisions. This means it no longer considers the 2018 booklet and the 2005 newsletter to be sufficient.

• His early retirement should be backdated as though he had retired at age 60. The Trustee has already backdated his retirement from October 2019 to July 2019. If his retirement can be backdated for several months, what prevents the Trustee from backdating it even further?

• When managing the Fund, the Trustee makes many decisions that are not subject to an explicit law. So, even if there is no single law or Fund provision that would allow for the Trustee to backdate his retirement, the Trustee should exercise its judgment and find that backdating his retirement is the correct course of action.

The Trustee provided its further comments regarding why Mr N’s pension was paid from 1 July 2019:-

• The retirement date of 1 July 2019 was not a backdated retirement date, instead it represented the ‘current date’ on which Mr N’s benefits became payable and the effective point of election for early retirement for the purposes of the Fund's rules.

• In 2019, the Trustee decided to send individually targeted communications to deferred members over the age of 55, to highlight the early retirement options available to them. As part of this process, it would produce an early retirement quotation at a certain date (in Mr N’s case, 1 July 2019), which would then be sent to the member. Essentially, the letter invited Mr N to elect to retire from 1 July 2019 (or such later date as he may select).

• Given the time from the calculation of the early retirement quotation to the date of sending and Mr N being able to complete the relevant retirement forms, practically the pension would come into payment after the retirement date set out in the retirement quotation.

• Whilst it could have quoted a future retirement date, that was not considered appropriate for this exercise which was intended to highlight Mr N’s immediate options.

I note the additional comments made by Mr N and the Trustee, but I agree with the outcome in the Adjudicator’s Opinion and, for the most part, the reasoning given. My analysis for not upholding the complaint to the extent it differs in part from the Adjudicator is explained below. 9 CAS-54214-V7J4 Ombudsman’s decision

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1 The 2013 Disclosure Regulations are made under, inter alia, the Pension Schemes Act 1993, and so in my view makes use of Section 180 of that Act to define “normal pension age”. 2 See, for example, the Joint Office Memorandum No 78 which sets out that: “The legislation defines “normal pension age” (NPA) as the earliest age at which a member would be entitled to receive benefits from his/her scheme on his/her retirement from relevant employment, disregarding any special provisions for early retirement on grounds of ill-health or otherwise. This can mean that even though a scheme specifies that its retirement age is 65, the NPA could be earlier if, for example, members were given an unqualified right to retire on an unreduced pension from an earlier age if they so wished.” 3 For example, Rule (E(1)(e)(iv)(B)) of the 2003 Rules sets out how a Transferring Former Unilever Fund Member can take his or her pension early without reduction: “…in the case of any Transferring Former Unilever Fund Member who elects to receive his retirement benefits on or after age 60 and before Minimum Pension Age…” (my emphasis added – which shows (i) the need for an election, and (ii) that early payment is not just at 60, but any time after it, at the choice of the member). 11 CAS-54214-V7J4

As a result, and in the absence of his election to receive his benefits at age 60, the obligation to write to Mr N in accordance with Regulation 20 did not arise immediately before age 60, as Mr N suggests.

4 Following Re Merchant Navy Ratings Pension Fund; Merchant Navy Ratings Pension Trustees Ltd v Stena Line Ltd and others [2015] All ER (D) 298, I agree this represents the better way of viewing what may previously have been seen as a duty to “act in the best interest of the beneficiaries”. 12 CAS-54214-V7J4

Mr N is aggrieved that the Trustee has refused to backdate payment of his early retirement benefits to his 60th birthday. He said the Trustee has already backdated the payment of his retirement from 27 October 2019 to 1 July 2019 and so there is nothing that would prevent the Trustee from backdating it further to 2016.

However, the Trustee has explained that the retirement date of 1 July 2019 was not a ‘backdated’ date but represented the ‘current’ date on which Mr N’s benefits would become payable even if he received the retirement pack and completed relevant forms after this given date.

I do not consider Mr N’s retirement date in 2019 to have been backdated in the way Mr N suggests. It is essentially an ‘offer’ being made to Mr N, representing the value of the benefits at a particular date, which he is then at liberty to accept. In contrast, it is Mr N that is asking to receive the backdated benefits that he would have received from age 60, had he elected to do so at that time.

As such, I find the Trustee made a reasonable decision in refusing Mr N’s request to backdate his retirement to 2016. Mr N did not begin the process of claiming his pension until he reached age 63, therefore it was appropriate for him to receive his pension benefits from this age. It is regrettable that Mr N did not enquire about his retirement options earlier, however, this was not due to maladministration on the part of the Trustee.

13 CAS-54214-V7J4 I do not uphold Mr N’s complaint.

Dominic Harris

Pensions Ombudsman 31 March 2023

14 CAS-54214-V7J4 Appendix E1 - Leaving service before retirement age

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Pension Review Newsletter (2005)

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