Ladbrokes Pension Plan · CAS-62344-S9Y4

CAS-62344-S9Y4

Ombudsman’s Determination Applicant Mr N

Scheme Ladbrokes Pension Plan (the Plan)

Respondents Ladbrokes Coral Group Pension Trustees Ltd (the Trustee) Lane Clark & Peacock LLP (LCP)

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 salient points. I acknowledge there were other exchanges of information between all the parties.

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“If the pension starts after Normal Retiring Date it will be increased for late payment on a basis decided by the Trustees.”

“Please note that these factors are subject to review so cannot be guaranteed.”

“Your benefits are covered in full by this policy, there will be no change to the amount of pension that you are entitled to receive from the Plan.”

2 CAS-62344-S9Y4 “If you delay the payment of your pension past your Plan normal retirement age, upon retirement it will be increased to reflect the shorter period of payment. This is also unchanged.”

• Check the figures and clarify the reasons for the reduction as he was expecting his pension to have increased when compared to the 2019 Quotation.

• Provide copies of the detailed calculations.

• Provide details of the new LRFs and why they had changed.

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• The change in factors had contributed to the reduction in Mr N’s retirement benefits when compared with the figures detailed in the 2019 Quotation. However, the primary reason for the difference was due to an inconsistency in how his guaranteed minimum pension (GMP) had been revalued over the period between his date of leaving the Plan and his NRA. The correct revaluation rate of 7% for each complete tax year had been used in the 2019 Quotation, but the 2020 Quotation used a lower rate. The error arose as a result of data changes during a project to reconcile the GMP figures held by the Plan with those held by HM Revenue & Customs. It acknowledged that the error should have been picked up earlier and apologised for this.

• The LRF of 1.250 used in the 2020 Quotation was based on market conditions in February 2020. However, the pension increase due on 1 April 2020 had not been allowed for in the calculation of the LRF. LCP should have explained this more clearly. The correct LRF, allowing for the April 2020 increase, was 1.301.

• Mr N’s recalculated annual pension, based on a retirement date of 14 May 2020, was £25,491.10. A revised retirement illustration would be issued to him.

• The Trustee was willing to offer Mr N an ex-gratia payment of £500, for the non- financial injustice he had suffered.

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On 17 January 2022, the Trustee wrote to Mr N concerning the Proposal. It said that the return of surplus assets would only be made after all liabilities under the Plan had been secured, as required under pension legislation. It confirmed that provision had been made to cover any additional liability should the complaint Mr N had subsequently made to The Pensions Ombudsman be upheld.

Summary of Mr N’s position

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He considers that the Trustee’s offer of £500 for the non-financial injustice he has suffered to be inadequate given that LCP made an error in the calculation of his pension and delayed providing him with the information he had requested.

• LCP unreasonably delayed providing him with a copy of the detailed calculations. He requested this information on 11 and 26 February and then on 10 and 30 March 2020.

• As of 20 April 2020, he had not received the retirement illustration. LCP informed him on 9 April 2020, that it would be sent to him.

• LCP’s letters of 24 February and 30 March 2020, provided him with details of two LRFs. However, the letters provided no explanation of why there had been a decrease in the pension figures. The information it provided at the time was misleading as the LRFs were applicable at different ages. Based on the LRF at age 65, there had been an adjustment in the LRF from 1.375 to 1.25: a reduction of 9.1%.

• The statement made by LCP at the time was misleading. It had indicated that the change to the LRFs was due to mortality assumptions and market conditions, also that the factors were now set by Rothesay.

• An error was made in the calculation of his GMP, but this was not identified, or disclosed to him, until the stage one IDRP response.

• He had to raise a further complaint because LCP notified him on 30 June 2020 that he would not receive his first instalment of pension until 31 July 2020.

• Furthermore, he was sent extracts of the main edition rules, but they were not applicable to his benefits in the Plan.

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It accepted that there were some delays in LCP responding to Mr N’s request for information. The Trustee acknowledges that as of October 2020, no explanation of the variance in the figures in the 2020 Quotation, when compared with the figures in the 2019 Quotation, had been provided by LCP. These issues were considered by the Trustee when making the offer of £500, which it considered to be appropriate in the circumstances.

Adjudicator’s Opinion

• The Plan is governed by pension legislation and the Rules. Rule 10.3, ‘Late Pension’, states:

7 CAS-62344-S9Y4 “If the pension starts after Normal Retiring Date it will be increased for late payment on a basis decided by the Trustees.

The Trustees must be reasonably satisfied that the benefits (including death benefits) for a Member who chooses a late pension are at least equal in value to the benefits that would otherwise have been provided for the Member under the Plan.”

• The Rules do not specify the Plan’s LRFs; rather they are set on a basis determined by the “Trustees”. Furthermore, Mr N was told by LCP in May 2019 that they were subject to review and could not be guaranteed. The Adjudicator took the view that the Trustee was entitled under the Rules to review the Plan’s LRFs at any time, this included during its meeting on 8 May 2019.

• In the Adjudicator’s opinion, the Trustee’s decision to bring the factors in line with those used by Rothesay, with effect from June 2019, did not amount to maladministration. A change of this type was not uncommon where pension benefits were being insured with a third party. If the Trustee had not adopted the new factors, it was possible that the benefits payable under the Rules would have differed from those insured with the insurer. When changing the factors, the Trustee acted on advice from the Actuary that the new factors were reasonable.

• Mr N had referred to a reduction in the LRF at age 65 of 9.1% following the changes approved by the Trustee in May 2019. In the Adjudicator’s view this was not correct.

• Mr N was advised by LCP in February 2020, that the LRF used in the 2020 Quotation was 1.250. However, he was subsequently told in June 2020 that this factor did not allow for the April 2020 pension increase. The factor that should have been used for the 2020 Quotation was 1.301. Furthermore, when the Plan’s LRFs were brought into line with those used by Rothesay, the LRF at age 65 was adjusted to 1.338. It was then adjusted to 1.301 before the date Mr N retired. In the Adjudicator’s view, the reduction in the LRF at age 65 was less than 3% at the point that it was consolidated with those used by Rothesay.

• Mr N had indicated that had he known that the factors would change at a future date, it was likely that he would have accepted the 2019 Quotation. The Adjudicator did not consider that this changed the outcome of his complaint. There was no requirement under pension legislation or the Rules for the Trustee to have notified members of changes to the Plan’s factors.

• Mr N had referred to the Trustee’s communication in September 2019. This stated that there would be no change to the amount of benefits he was entitled to receive from the Plan following the transfer of liability to Rothesay. The Adjudicator did not take the view that subsequent events resulted in this promise being broken. At the date of this communication, the benefits that Mr N was entitled to were defined by the Rules. This continued to be the case when he chose to retire in May 2020.

8 CAS-62344-S9Y4 The Trustee was entitled to regularly review the factors used by the Plan irrespective of whether or not liability for the benefits were being transferred to Rothesay.

• Mr N highlighted the terms of the Proposal, which he did not consider to be ‘normal’ administrative practice. In addition, he did not consider that the changes made to the LRFs by the Trustee were appropriate given that the Plan was in surplus. For the reasons already given, the Adjudicator’s view was that the Trustee had the necessary authority under the Rules to change the LRFs regardless of whether the Plan was in surplus or not. Furthermore, the Trustee confirmed that member benefits, as defined by legislation and the Rules, had been secured with Rothesay. So, the Adjudicator did not take the view that the Proposal had an adverse impact on Mr N’s benefits.

• The Adjudicator considered whether the Trustee or LCP caused Mr N a non- financial loss, such as distress and inconvenience. In his stage one IDRP response, the Plan’s Pensions Manager acknowledged that the 2020 Quotation provided by LCP was incorrect. This was because an incorrect revaluation rate had been applied to the GMP. Furthermore, there had been delays in LCP providing Mr N with the information he had requested. In addition, the explanation it provided in relation to the LRFs used in the 2019 and 2020 Quotations did not make the position sufficiently clear. In the Adjudicator’s view, these errors and omissions on the part of LCP amounted to maladministration and would have caused Mr N significant distress and inconvenience.

• The Adjudicator noted that the Trustee had offered Mr N £500 for the distress and inconvenience he had experienced in connection with this matter. In the Adjudicator’s view, this offer was in line with what I would award for non-financial injustice in similar cases. So, the Adjudicator did not believe that I would direct that the Trustee or LCP pay Mr N a higher award.

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

Mr N provided his further comments in response to the Opinion. In summary he said:-

• He had been misled by LCP’s letter of 9 May 2019 which failed to mention that the previous day, the Trustee had decided to change the Plan’s LRFs. Prior to this, the LRFs had remained unchanged for many years.

• From 2015 to 2020, he had requested a retirement quotation and details of the LRFs annually. He had also sought an explanation of factors that may result in a change to the LRFs. There was a difference between there being no requirement for changes in the LRFs to be communicated to Plan members, and the disclosure of pertinent information in response to specific questions.

• He had been misled by the Q&A Sheet as the underlying impact was a reduction in the value of his pension. 9 CAS-62344-S9Y4 • Aligning the Plan’s LRFs with those of Rothesay to achieve a bulk annuity purchase could not be properly undertaken without the adequate consideration of any negative impact on individuals. No evidence had been submitted of any legal advice received by the Trustee. It had a duty to meet the best interests of the members and no disclosure has been made of the consequences for late retirees or of any options to mitigate any adverse impact.

• The Adjudicator had implied that a reduction at age 65 in the LRFs of less than 3% was acceptable, but no reference was made to the implications of this. Furthermore, the May 2019 LRF at age 65 of 1.375 had reduced to 1.301 by May 2020, a reduction of 5.38%.

• He accepted that LRFs would change to accommodate normal eventualities, such as changes in market conditions and mortality rates.

• The existence of a substantial surplus in the Plan and an intention to wind it up with a refund of surplus to the Principal Employer were already in the Trustee’s mind when it decided, in May 2019, to change the LRFs and initiate the Buy In.

• The reduction in the value of his benefits caused by the change in LRFs had increased the Plan’s surplus and had benefitted the Principal Employer.

I have considered the additional points raised by Mr N, however they do not change the outcome. I agree with the Adjudicator’s Opinion.

Ombudsman’s decision

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I do not uphold Mr N’s complaint.

Anthony Arter CBE

Deputy Pensions Ombudsman 31 August 2023

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