Local Government Pension Scheme · CAS-32156-V4R7

CAS-32156-V4R7

Ombudsman’s Determination Applicant Mr D

Scheme The Local Government Pension Scheme (the Scheme)

Respondent South Tyneside Council (the Council) Tyne and Wear Pension Fund (TWPF)

Complaint Summary

Summary of the Ombudsman’s Determination and reasons

• The Council, on behalf of TWPF had provided incorrect information to Mr D over several years, which resulted in him having limited options at retirement. • This situation has caused Mr D severe distress and inconvenience.

1 CAS-32156-V4R7 Detailed Determination Material facts

“I refer to your recent enquiry and our subsequent telephone conversations regarding your LGPS benefits.

On reviewing your case, I can confirm that you do not have the option to defer claiming payment of your LGPS benefits, as was previously stated in our letter to you. Nor can you transfer those benefits to another provider as you are within one year of your Normal Pension Age in the Scheme which is 60.

In fact your only option is to receive payment of your LGPS benefits with effect from your normal retirement date at age 60…

I understand you may be disappointed with this decision; however we must act in accordance with the Scheme Regulations. I am sorry for any distress or inconvenience you may have experienced from our previous correspondence…”

As a result of the Council’s repeated error, he made decisions he would not have made had he been aware of the correct position.

given greater consideration to, and possibly exercised, his option to transfer his benefits from the Scheme. He would have structured his personal investments differently, which would have resulted in him not holding such a great amount in cash. 2 CAS-32156-V4R7

Summary of Mr D’s position

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• He accepts that he was never legally permitted to defer claiming his pension until age 75, and understands that the Pensions Ombudsman (TPO) cannot grant this.

• However, the option to transfer benefits was, among other things, introduced to both enable pension holders to have flexibility to utilise accrued benefits and also to avoid the situation where the total value of funds is at risk to the pension holder, and/or their estate, due to early death.

• The right to transfer his pension from the Scheme has been taken away from him, due to the Council’s misinformation.

• The ability to transfer benefits was considered a celebrated freedom at the time it was introduced and, but for the Council’s misinformation, is an avenue he would have pursued. It is “wholly unfair” that he is now unable to transfer his benefits from the Scheme because of the Council’s misinformation, when that right previously existed.

4 CAS-32156-V4R7 • It is “counter intuitive” that there is a finding and general agreement that what the Council communicated was wrong, and outside the scope of the Regulations, but that a decision barring him from the justice he seeks is based upon the need to comply with the Regulations.

• The result of this is to ignore a breach of the Regulations leading to misinformation by the Council and therefore damaging his rights, but to rely on the Regulations in order to deprive him of justice. Justice will only be served by restoring his rights.

• While he can point to the fact that if he were to transfer his pension from the Scheme, he would be to some degree ‘ring fencing it’ against his early death and loss of a pension, TWPF could argue that should a drawdown fund drop in value, against him outliving an actuary’s assessment of how long he will draw an annuity, he would gain with the pension option.

• So, much of his case is that he fully understands the relative merits of drawdown against pension and has a clear view on this. He has been misled to the extent that he is potentially deprived of this right.

• He and his wife have a seven-figure investment in various funds, of which over £300,000 is held in his accumulated ISA. He ensured that he was able to take financial steps, relating to his Scheme benefits, including the drawdown option, without prejudicing his and his family’s financial security.

• Relying on the statements on TPO’s website, he believes that in the absence of the ability to defer claiming his pension until age 75, he ought to receive justice and be given the opportunity to pursue the drawdown option.

• He has not focused on the financial award for distress and inconvenience. However, he would say that his circumstances fit the “severe” category of TPO’s guidance on redress for non-financial injustice.

• He considers that the Council’s misrepresentation regarding issuing an apology and a goodwill payment, as part of the appeals process, when it had ended four months before, constitutes “wilful” and/or “reckless” conduct on the Council’s behalf.

• He considers the Council’s attempted payment of £500, after it had concluded the IDRP without upholding his complaint, was made in light of the fact that he was considering bringing his complaint to TPO. It was a “last-ditch attempt on the Council’s part to stop its maladministration and inadequate response from being adjudicated upon”.

• He does not consider that £500 from the Council is adequate or resolves his complaint. The lack of any apology from the Council, “adds to the sense of injustice and a feeling that they have lacked real reflection and consideration of [his] submissions to them”. 5 CAS-32156-V4R7 • He noted that TPO has the discretion to award interest. As the matter has now gone on for over two years, he felt that he ought to receive interest in relation to the excessive timescale in order to resolve the matter.

• Due to the amount of his accumulated wealth, any sums paid to him as a pension will be added to his estate and subject to IHT charges of 40% on his death. For that reason, he has been advised, by his IFA, not to draw any of his pension during his lifetime, so he has not yet claimed his benefits from the Scheme.

Summary of the Council and TWPF’s position

Conclusions

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1 https://www.legislation.gov.uk/uksi/2013/2356/regulation/53

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“Note: You can only transfer your benefits built up in the LGPS if you are more than one year away from your Normal Pension Age (NPA – this is normally your state pension age with a minimum of age 65), although you can transfer an Additional Voluntary Contribution after this time”.

2 https://www.lgpsmember.org/arl/already-left-tvout.php

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I uphold Mr D’s complaint in part.

Directions

Anthony Arter

Pensions Ombudsman 26 November 2021

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