Monsanto Pension Plan · CAS-53961-Q2N6

CAS-53961-Q2N6

Ombudsman’s Determination Applicant Mrs Y

Scheme Monsanto Pension Plan (the Plan)

Respondents Law Debenture (the Trustee)

Capita Employee Benefits (Capita)

Outcome

Complaint summary

Background information, including submissions from the parties

• the Guaranteed Minimum Pension (GMP) Mrs Y accrued before 6 April 1988 (the Pre 88 GMP);

• the GMP Mrs Y accrued on or after 6 April 1988 (the Post 88 GMP);

• benefits Mrs Y accrued before 6 April 1997 in excess of the GMP (the Pre 1997 Benefits); and

• benefits Mrs Y accrued from 6 April 1997 in excess of the GMP (the Post 1997 Benefits). 1 CAS-53961-Q2N6 On 12 September 2018, Mrs Y requested a retirement pack from Capita, the Plan’s administrator at the time.

On 18 September 2018, the retirement pack was sent to Mrs Y. This detailed the options Mrs Y could choose at retirement. These were:

• take a full retirement pension of £21,357.73 per annum (Option 1); or

• take a reduced retirement pension of £15,768.34 per annum and the maximum PCLS of £105,122.26 (Option 2).1

“How is my PCLS calculated?

The rules of the Scheme allow you to give up some of your pension in exchange for a one-off lump sum that is paid to you at retirement. The rules and relevant legislation set out the maximum PCLS that can be paid. The amount of lump sum you can receive and the pension that you are entitled to give up in exchange for the lump sum is calculated using a commutation factor set by the Scheme Actuary which is determined using various assumptions, including, for example, anticipated life expectancy.

Neither Capita nor the Trustee can advise you on whether it is in your best interests to opt to receive a PCLS in exchange for a reduced retirement pension. This will depend on your own personal circumstances and it is recommended that you seek professional financial advice where appropriate.”

In March 2019, Capita sent Mrs Y a pension increase letter (the PI Letter). This letter informed Mrs Y of the elements of her pension in payment that were subject to annual increases.

Subsequently, there were exchanges between Mrs Y and Capita concerning the PI Letter and how Mrs Y’s benefits were commuted to provide the PCLS.

1 Mrs Y also had the option to specify the amount of PCLS she wished to take if she did not wish to take the maximum. 2 Capita explained that the pension would be paid monthly in advance and that the first instalment would be paid to Mrs Y’s bank account on 21 December 2018. 2 CAS-53961-Q2N6 Mrs Y raised a complaint with Capita as she was disappointed to discover that her Post 1997 Benefits had been commuted first to provide the PCLS, but that this was not explained in the retirement pack she was sent by Capita.

• The commutation of her pension had been completed correctly in that the Post 1997 Benefits had been commuted first. In her case, this element of her benefits had been exhausted.

• Having reviewed the pension documentation provided prior to retirement, it accepted that how her benefits would be commuted was not made clear, and it had amended its correspondence accordingly. It also raised this issue with the Trustee and the Trustee is aware of the changes made.

• It apologised for not providing clear information regarding the order of how her benefits would be commuted and how it would affect her pension.

• In recognition of its error, it offered Mrs Y a good will gesture of £100, in full and final settlement of her claim against Capita and the Trustee (the Offer).

• It noted that Mrs Y had expressed a concern that the Plan’s order of commutation for a PCLS started with her Post 1997 Benefits which received an automatic increase, then followed with the Pre 1997 Benefits, which only received discretionary increases.

• The pension was commuted by a commutation factor which determined the amount of PCLS Mrs Y received from commuting the benefit. The factor was based on the type of increase and, as such, was higher for the Post 1997 Benefits.

• Although a higher proportion of her benefits did not receive an automatic increase post commutation compared to pre commutation, if the Plan’s order of commutation was to commute the Pre 1997 Benefits first, she would have needed to commute more annual benefit to receive the same PCLS, and her annual post commutation pension would have been lower than it was.

3 Capita provided a table with this information and this table is detailed in Appendix 2. 3 CAS-53961-Q2N6

• When deciding on her retirement options and whether to choose Option 1 or Option 2, she chose Option 2 as it was her understanding that by doing so she would still receive her Post 1997 Benefits.

• When she received the PI Letter, she was surprised that the Post 1997 Benefits element of her pension had not been included in the calculations.

• Consequently, she telephoned Capita to query this. Capita promised to raise her query as a complaint and to reply to her as soon as possible. Unfortunately, she had to chase Capita twice before she received a written response.

• From what she understood from the June 2019 Letter, her Post 1997 Benefits had been commuted into a PCLS, but she had not seen any proof of that to date. The June 2019 Letter acknowledged that this information had not been made clear in any pension documentation she had received prior to her retirement.

• She appreciated that all future documentation to retirees would be amended so that they could make an informed choice over which option they should choose. However, it remained that she had based her decision on what choice of retirement option to take on the documentation she had received prior to her retirement, and it was also part of the reason she chose to retire at age 60.

• It was acknowledged that while members were able to request details of the split between the relevant elements of their benefits, it would have been beneficial for this to have been provided as part of the standard retirement pack information. The Trustee would work with Capita to assess the feasibility of providing this level of breakdown, and to emphasise to members that this can be requested if further clarity was needed.

• It was not possible to rescind or reverse a benefit crystallisation event, such as receiving a pension and a PCLS, or the associated options taken as part of that event.

• The overall responsibility of the Trustee was to ensure that the benefits were calculated and paid in accordance with the Rules of the Plan (the Rules).

• Based on the circumstances of Mrs Y’s case, it did not deem that she had been treated unfairly, and it was satisfied that the Rules had been correctly applied by Capita, when setting up the payment of her retirement benefits.

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4 The Trustee explained that Rule 6.7 prescribes how the PCLS should be calculated and is detailed in Appendix 3. 5 This is detailed in Appendix 4.

7 CAS-53961-Q2N6 Adjudicator’s Opinion

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7 Mrs Y provided a table detailing the annual increases she had received on her pension in payment to date, to evidence the impact her Post 1997 benefits being commuted to provide the PCLS first, has had on her retirement income. 9 CAS-53961-Q2N6

Subsequently, there were further exchanges between Mrs Y and the Adjudicator concerning the Adjudicator’s Opinion.

Mrs Y did not accept the Adjudicator’s Opinion, and her complaint was passed to me to consider. I note Mrs Y’s further comments, but I find that they do not change the outcome. I agree with the Adjudicator’s Opinion

Ombudsman’s decision

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Dominic Harris

Pensions Ombudsman 28 December 2023

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Appendix 1 Relevant sections of the notes that were included in the retirement pack Capita had sent to Mrs Y on 18 September 2018, that detailed how different elements of her pension would increase once in payment.

“How will my pension increase once in payment?

Your pension, in excess of your Guaranteed Minimum Pension, will be increased by the Scheme each April as follows:

Pension Accrued Increase Amount

Before 6 April 1997: At the discretion of the Trustees.

From 6 April 1997 to 5 April 2005: In line with the Consumer Prices Index (CPI) to a maximum of 5%

…

What is a Guaranteed Minimum Pension (GMP) and how is it increased?

…

The part of your pension, if any, representing the GMP accrued before 6 April 1998 will not be increased whilst in payment by the Scheme. The Scheme is not required under legislation to increase this element of your pension.

The part of your pension, if any, representing the GMP accrued after 5 April 1988 will be increased from the GMP Payment Age by the Scheme each April in line with inflation, up to a maximum of 3% per annum. The Scheme is only required under legislation to increase this element of your pension up to a maximum of 3% per annum.”

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Appendix 2 The breakdown of each element of Mrs Y’s benefits as detailed in Capita’s 8 August 2019 letter to Mrs Y.

Benefit Type Pre-Commutation Post-Commutation

Pre 06/04/1997 Excess £12,083.02 per annum £10,950.56 per annum Benefits

Post 06/04/1997 Excess £4,456.91 per annum £0.00 per annum Benefits

Pre 06/04/1997 GMP £1,672,32 per annum £1,672.32 per annum

Post 06/04/1997 GMP £3,145.48 per annum £3,145.48 per annum

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Appendix 3 Relevant sections of the Monsanto Pension Plan Rules

“6.7 Lump sum benefits on retirement

Any Member who retires from Pensionable Service and who under the provisions of any Section becomes entitled to a pension out of the Fund may, at the time when such pension commences to be payable, elect to receive a lump sum equivalent to 3/80th of the greater of:

(i) the Member’s Pensionable Salary at the date of retirement; and

(ii) the total Salary, of the Member during the twelve months preceding the date of retirement;

for each year of his employment with the Employers (not exceeding 40 years) and not exceeding the limits specified in Overriding Appendix A or with the consent of the Trustees such greater sum as the Member may require but not exceeding the capital value in actuarial terms of such pension and not exceeding the limits specified in Overriding Appendix A. The consideration for such lump sum shall be a reduction in the pension payable under the foregoing provisions of this Part of an amount which shall be certified as reasonable by the Actuary.”

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Appendix 4 Table showing a comparison of the retirement benefits Mrs Y would have received had her benefits been commuted differently.

Dates Actual Actual Alternative Alternative Difference Difference pension PCLS pension PCLS in pension in PCLS (pa) (pa) (pa)

15/12/2018 £15,768 £105,122 £15,768 £83,724 £0 £-21,398

01/04/2021 £16,243 £16,240 £-3

01/04/2023 £16,515 £16,890 £375

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