Nhs Pension Scheme · CAS-61350-V2X9

CAS-61350-V2X9

Ombudsman’s Determination Applicant Ms N

Scheme NHS Pension Scheme (the Scheme)

Respondents NHS Business Services Authority (NHS BSA)

Outcome

Complaint summary

Background information, including submissions from the parties On 16 September 1990, Ms N became an active member of the 1995 Section of the Scheme.

On 4 June 2004, Ms N elected to purchase five years 107 days additional membership in the Scheme, by paying 9% additional contributions until 2018, when she reached age 55. At the time she was working part time – at 0.4 whole time equivalent (WTE). The declaration at the end of the election signed by Ms N included the following:

“I have read the Scheme booklet “Increasing your benefits”.

From 30 April 2014 to 3 November 2014, Ms N had a break in active membership.

1 CAS-61350-V2X9 On 26 April 2018, Ms N received an Annual Benefit Statement (ABS) showing her estimated benefits in the Scheme as of 31 March 2017. The information showed:-

• Pay was £36,794.50.

• Pension was £9,124.28.

• Lump sum was £27,372.84.

In November 2018, Ms N received a pension forecast. The information showed that she had only purchased approximately two additional years of additional service in the Scheme.

On 28 November 2018, Ms N contacted NHS BSA because she believed her pension forecast did not show the correct amount of additional service she had purchased.

On 26 February 2019, NHS BSA responded to Ms N to inform her that her pension forecast was correct.

On 5 March 2019, Ms N contacted NHS BSA again to ask for more information as to why her pension forecast only showed her as having purchased two years of additional service in the Scheme.

On 31 May 2019, NHS BSA responded to Ms N. It reiterated that Ms N’s pension forecast was correct but did not provide an explanation regarding her additional service query.

On 17 August 2019, Ms N submitted a complaint to NHS BSA. She said:-

• She had contacted NHS BSA because she had been working 0.4 of her normal hours for four years.

• She was advised to purchase an additional five years of service to make up the difference.

• She felt this made sense because 0.4 x 14 = 5.6 whole years.

• In November 2018, she was shocked to find out that she had contributed an extra £25,000 but had only purchased two years of additional service.

• An error must have been made when calculating her pension estimate.

• She would not have agreed to pay such a large amount in additional contributions had she been aware she would have only received two added years.

On 8 October 2019, NHS BSA responded to Ms N’s complaint. It said:-

• When Ms N signed the contract to purchase added years, she also signed to state that she had carefully read the Scheme Booklet.

2 CAS-61350-V2X9 • The Scheme Booklet states, “part-time purchase will not buy you full days, but a proportion of days dependant on the hours you have worked.”

• It had tried to explain this to her several times.

• It acknowledged that it had not responded to her complaint within its usual timescales.

On 14 October 2019, Ms N escalated her complaint under stage one of the Scheme’s Internal Dispute Resolution Procedure (IDRP). She said:-

• She had read and fully understood the relevant section of the Scheme Booklet.

• She did not expect to purchase a full additional year while only contributing part- time, but she was informed that she would secure five added years over a 14-year period which made sense to her.

• NHS BSA had not explained why £25,000 in additional contributions only purchased two added years when approximately £38,000 of contributions had amounted to almost 19 years of membership prior to the contract.

On 21 November 2019, NHS BSA responded to Ms N’s complaint under stage one of the Scheme’s IDRP. It said:-

• Information relating to purchasing added years was available in the Scheme Booklet which all members were advised to read.

• The extra pension contributions payable on an added years purchase were a percentage of a member’s pay. So, a part-time member would pay less than a full- time member. It would be unfair for a part-time member to receive the same number of added years while contributing less than a full-time member.

• In addition, normal pension accruement consists of both member and employer contributions. When a member contracts to purchase added years, the employer does not contribute, and the member must pay the full cost of the added years. So, the member will pay more for their added years than they would pay for their normal pension contributions.

On 29 February 2020, Ms N escalated her complaint under stage two of the Scheme’s IDRP. She said:-

• NHS BSA had not addressed all the points she had raised in stage one of the IDRP.

• NHS BSA’s response did not contain an apology for the extensive period the department who dealt with added years had taken to respond to her initial queries.

• She was incorrectly led to believe that paying into an added years contract over 14 part-time years would purchase five full-time years of additional service.

3 CAS-61350-V2X9 • The first time she was made aware that her employer would not contribute to the added years contract was in the letter dated 21 November 2019.

On 20 August 2020, NHS BSA responded to Ms N’s complaint under stage two of the Scheme’s IDRP. It said:-

• The maximum added years Ms N could purchase was five years 107 days.

• It was not until her actual retirement benefits were calculated that part-time hours were converted into a whole time equivalent.

• It understood the method that Ms N thought was used to calculate the added years contract but confirmed that this was incorrect.

• The number of calendar days over which Ms N made additional contributions was from 30 September 2004 to 30 April 2014 then again from 5 September 2016 to 29 September 2018. These two periods together amounted to 10,734 days.

• 10,734 days when scaled to the full-time equivalent taking into consideration her part time hours equated to 2,004 days.

• The period from 3 November 2014 to 4 September 2016 equated to 671 days because Ms N was in full-time employment during that period.

• Ms N intended to purchase 1,932 days of added years. She contributed for a total of 2,675 days but the intended period of payment was 5,110 days. When calculated, this meant Ms N had purchased two years 282 days of added years.

• The reason that Ms N’s added years contract did not display this on 4 June 2004 was because it was impossible to know whether Ms N would have been in full- time employment or not. So, the relevant adjustment to the added years purchased could only be made upon retirement or completion of the contract.

• The cost of standard membership was shared between the member and the employer. It would be unfair on the employer to be forced to contribute towards added years when it does not have a say in the decision to make a purchase.

• If Ms N had worked full-time throughout the added years contract, then she would have successfully purchased five years 107 days membership. Since for most of that time, she worked part-time and for a period, was not in pensionable employment, she did not make sufficient contributions to receive the full five years 107 days.

NHS BSA’s position:-

If Ms N had worked full-time throughout the added years contract, then she would have successfully purchased five years 107 days membership. Since for most of that time, she worked part-time and for a period, was not in pensionable employment, she did not make sufficient contributions to receive the full five years 107 days.

4 CAS-61350-V2X9 Ms N had commented that the overall cost to purchase the added years was six times that of usual pensionable service. This was because contracts to purchased added years were not contributed to by Employers. It was the members responsibility to cover that cost too.

The Scheme Booklet was available to all members at the time Ms N signed the added years contract. The Scheme Booklet had set out the monthly cost for each additional year that a member wished to purchase. In addition, the Scheme Booklet displayed the effect that working part-time would have on purchasing added years.

It had attached a copy of the application form that Ms N had signed in June 2004 which contained a section that asked Ms N to confirm that she had read the Scheme Booklet.

The application form also stated that she would be purchasing additional service at a contribution rate of 9%.

Ms N’s position:-

She had been incorrectly advised that 14 part-time years would purchase five full- time years of additional service.

NHS BSA had not conformed to its response time policy, having taken significantly longer than eight weeks to respond.

She had not received an apology from NHS BSA.

It was logical to expect that five added years would be purchased over 14 part-time years.

Adjudicator’s Opinion

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Ombudsman’s decision

I note that Ms N has made numerous references to the advice given to her by the NHS Pension Advisor at her employer. While I do not doubt Ms N’s account of events, I cannot consider (or at least allocate, relatively, little weight to) information which was supplied verbally and not accompanied by evidence in either a call recording or contemporaneous note. Ms N has not provided documentary evidence of the advice supplied by the NHS Pension Advisor, but in any event, it is Ms N’s responsibility to ensure a clear understanding of the information provided.

In addition, Ms N’s complaint is specific to NHS BSA. It would be unfair to blame NHS BSA for any misunderstanding on Ms N’s behalf that has derived from a third party. As a result, I will not address the information relating to the NHS Pension Advisor at her employer any further.

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Ms N has also said she had read the Scheme Booklet and her understanding of the information in the Booklet confirmed the advice she had been given. While I sympathise that Ms N may have misinterpreted the Scheme Booklet, the information contained therein was readily available and accurate and so NHS BSA cannot be held responsible that it was misunderstood by Ms N.

Rather, in my view, it was reasonably clear that the number of added years purchased would be reduced by dint of any part time service: “If you work part time, the amount of added years …you get for your extra contributions … will take account of this”. Indeed, the Scheme Booklet contained an example to illustrate this: “… if you work half time and apply to buy 10 added years … you will only pay half the extra contributions (or single payment). And you will get 5, not 10 years, of additional benefit.” As noted previously, when Ms S signed the election to purchase added years, she confirmed that she had “read the Scheme booklet “Increasing your benefits””.

It may be possible to argue that she had assumed that the figure included in the election took account of this reduction (although that then would not have been able to flex to reflect later changes in her working pattern, as the Scheme Booklet notes: “if the hours you work change, your contributions and the benefits you get will also change”). However, that would have been an incorrect assumption. Rather, in my view the Scheme Booklet was sufficiently clear to enable Ms N to ascertain how her added years would be calculated (or at least to trigger questions if to the extent that she had a different view).

Ms N has stated she had no reason to believe that the calculations in the Scheme Booklet meant anything other than what had been explained to her verbally. There is a responsibility conferred upon all members of the Scheme to digest the information within the Scheme Booklet in its entirety. Therefore, had Ms N done so, as advised in her added years contract, she would have noted that working part time would have reduced the number of added years she could purchase and the cost of purchasing the additional membership, and likely sought further clarification before signing an agreement.

Ms N does not agree that she had been informed that her employer would not be making contributions and maintains that the information required was not readily accessible in the Scheme Booklet either. I agree that this information was not directly quoted in the Scheme Booklet and could have been made clearer. I cannot see evidence of Ms N requesting a breakdown of the overall cost associated with purchasing the additional membership. It is not reasonable to sign an election to purchase added years of service without first confirming the cost. Had Ms N done so,

8 CAS-61350-V2X9 she would have noted that the cost was significantly greater than her standard contributions and could have queried the reasoning before signing the election.

In summary, I do not find that NHS BSA are directly responsible for any financial loss to Ms N. The information she sought was readily available in the Scheme Booklet and she did not take reasonable steps to confirm her understanding of the election she was signing before committing to an agreement.

I have, however, also reviewed the poor level of service provided to Ms N by NHS BSA. Its failure to conform to its own service requirements and unsatisfactory responses in the earlier stages of Ms N’s complaint will have undoubtedly caused Ms N significant distress and inconvenience. I find that a payment of £500 is appropriate recognition in the circumstances.

I uphold this complaint in part.

Directions

Dominic Harris

Pensions Ombudsman

29 January 2024

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