Summary

Whether maladministration correctly found against pension trustees and fund managers in case concerning pension transfer value.

Facts

The case concerned the pension arrangements of a Mr Bower, a member of the Digital Equipment Co Ltd (Digital) Pension Scheme, whose employment with Digital had terminated by reason of redundancy. The general administration of that pension scheme was conducted on behalf of the Trustees by HRFS, a specialist company. When Mr Bower's employment by Digital ceased he had a right to have the value of his pension transferred out of the scheme and paid to a personal pension policy. This right was exercised and £284,000 was paid across to the insurance company. Mr Bower submitted that it ought to have been about £328,000 and that the reason why the incorrect amount had been paid lay in the maladministration of the scheme by HRFS and the Trustees. He complained to the Pensions Ombudsman who upheld the complaint, making findings of maladministration against HRFS and the Trustees, in that they miscalculated the transfer value. By the time the mistake had been rectified, the three-month period in which the transfer value (at its correct valuation) was guaranteed had expired and because of adverse stock exchange movements, the transfer value had fallen. HRFS and the Trustees refused to allow the transfer at the old transfer value. The Ombudsman directed HRFS to pay to the "new pension arrangement" the amount needed to put Mr Bower in the position he would have been in if the payment made by the trustees had been the higher amount. The trustees and HRFS appealed, submitting that there was no maladministration and, even if there was, any injustice sustained by Mr Bower was not in consequence of it.

Held

(1) There was maladministration on the part of HRFS. (i) The Preserved Pension Certificate and an accompanying letter were deficient. This constituted maladministration. (ii) There was a delay after HRFS learnt that Mr Bower had not received a comparison which he needed to reach a decision. It was possible that this could be a further instance of maladministration but that was a question of fact for the Ombudsman and should be considered when he reconsidered the causation issue (below). (iii) The refusal to extend the guarantee period was not maladministration within s.146(1)(a) Pensions Schemes Act 1993, contrary to the Ombudsman's determination. Maladministration was a matter of procedures followed rather than the merits or demerits of what was done. (2) The Ombudsman was wrong to decide that the Trustee's decision to delegate the matter to HRFS constituted maladministration as a body of Trustees constituted like this one could not be expected to consider every individual complaint or grievance arising in the course of the administration of the scheme. There was no evidence to justify the Ombudsman's implied criticism that the Trustees had failed to prescribe adequate guidelines for HRFS.

The question of causation should be remitted to the Ombudsman as he had not addressed that issue in the right way. The following questions needed to be answered. (i) Did Mr Bower suffer his loss in consequence of the failure of HRFS to supply to him on 5 January 1994 a full and accurate statement of his transfer value? (If so, the decision directing HRFS to make a payment in compensation would stand). (ii)(a) If not, was there maladministration in the failure of HRFS to supply him with a corrected comparison in sufficient time for him to consider it and reach a decision before the guarantee period ran out? If so (b) was Mr Bower's loss suffered in consequence of that failure?