Emerson Uk Pension Plan · CAS-62941-W6P5

CAS-62941-W6P5

Ombudsman’s Determination Applicant Mr T

Scheme Emerson UK Pension Plan (the Plan)

Respondents Emerson UK Trustees Limited (the Trustee)

Capita

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events 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.

In the paragraphs that follow, pre 1997 refers to the period before 6 April 1997 and post 1997 to the period after 5 April 1997. CAS-62941-W6P5

“If the member was previously a Brooks member […] If the member was previously a Westinghouse member […] Any further pre 1997 benefits will increase at the company’s discretion.”

“No increases (for benefits accrued prior to 6 April 1997 in excess of the Guaranteed Minimum Pension).”

2 CAS-62941-W6P5

• Prior to his retirement, he requested information on the Plan. He was sent a copy of ‘The Emerson UK Pension Plan (the Plan) Benefit Notes’ (the Notes). He reviewed the information in the paragraph ‘How will my pension increase once it is in Payment?’ and he asked Capita on what date the increases to his pension would occur. He was told 1 April each year.

• He was given unclear information that led him to believe that his pension would increase annually in line with inflation, and this had caused him to make decisions that had disadvantaged him.

• Capita had sent communications to Mr T's IFA in November 2017 and October 2019, in which the correct pension increases were detailed. However, the Notes included incorrect information.

• How pensions increased in payment was dependent on which section of the Plan the member was in. Mr T was in the Fisher-Rosemount section, and he was entitled to receive discretionary increases on his pre 1997 pension. The Trustee may decide to award an increase if the Plan became very well-funded, but it was not obliged to do this.

• At age 65, Mr T's guaranteed minimum pension (GMP) will come into payment. The part of his GMP accrued after April 1988 will receive increases in line with the CPI, capped at 3% per annum.

• When Mr T retired, his most recently accrued pension, in this case his post 1997 index linked pension, was commuted. As he exchanged a more valuable index linked pension for cash, he would have received more favourable terms than if he had exchanged his non increasing pension.

• It agreed that the information Mr T had received from Capita could have been clearer. Due to this, and issues Mr T had with the service provided, Capita was willing to offer him an ex-gratia payment of £250.

3 CAS-62941-W6P5 • All the communications he had received indicated his pension would be increased in line with the CPI. These included:

o a document dated 2002: ‘Emerson Electric UK Pension Plan – Fisher- Rosemount Section Deferred Pensions’ (the Deferred Document). An extract from the Deferred Document can be found in Appendix 1;

o Capita’s letters of 28 March 2014 and 5 February 2016; and

o the Notes, an extract from which can be found in Appendix 1.

• The Trustee said that correct pension increase information had been provided to his IFA in 2017 and 2019. However, he had been told by his IFA that: “We cannot beat the scheme, especially due to its benefits and index linking.”

• He had been told twice on telephone calls with Capita that his index linking would take place on 1 April every year.

• He had queried his benefits with Capita and had received its response on 1 February 2019 confirming that the figures he had been provided with were correct. It was never explained to him that his latest pension would be used to provide his PCLS.

• His pension not being index linked would have a profound effect on its purchasing power.

• He would like CPI index linking restored to his pension, backdated to 1 April 2020.

• Mr T had referred to the Deferred Document which stated that his pension in respect of pre-April 1997 service may be increased at the discretion of the Trustee. There was no requirement under pensions legislation for this element of his pension to be increased. Under the Rules the Trustee did not have the power to increase this element of pension. It could only be increased if the Principal Company directed this and there had never been such a direction for the section of the Plan of which Mr T was a member.

• Capita’s letter of 5 February 2016 said that pensions accrued prior to 1997 did not receive increases in payment.

• Capita’s letter of 28 March 2014 related to the revaluation that applied to Mr T’s pension in deferment.

• The Notes contained incorrect information, stating that Mr T’s pension accrued prior to 6 April 1997 would increase in payment in line with the CPI to a maximum of 5%. It apologised for this error.

4 CAS-62941-W6P5 • It was not industry practice to ask a member the tranche of pension they wish to surrender for their PCLS.

• It had a duty to pay benefits in accordance with the Rules.

• It offered Mr T £1,000 as a gesture of goodwill in full and final settlement of his claim.

• Mr T’s pre commutation annual pension was £28,601.89. He received a PCLS together with a residual annual pension of £23,503.55. The PCLS was taken from Mr T’s post 1997 annual pension of £3,794.99 and £1,303.35 of his pre 1997 annual pension.

• Had Mr T’s PCLS been taken wholly from his pre 1997 pension, he would have received the same cash sum together with a reduced annual pension of £21,233.86 of which £3,794.99 would have been index linked.

• The Trustee considered that Mr T was no worse off and that he would not have made different retirement decisions had he been given the option of taking his full PCLS from his pre 1997 pension.

• He had a copy of ‘The Rosemount Retirement Benefits Programme – a guide for members’ (the Guide). The Guide refers to pension increases in payment and an extract from it can be found in Appendix 1.

• He did not accept the Trustee’s offer of £1,000.

Adjudicator’s Opinion

5 CAS-62941-W6P5 • The Deferred Document that referred to increases being at the Trustee’s discretion;

• Retirement estimates sent to Mr T by Capita in June 2012 that referred to increases being at the company’s discretion;

• A response from Capita to Mr T in February 2016, and a letter to the IFA in November 2017, that both referred to there being no increases;

• The fact sheet sent to Mr T in October 2019 that also referred to there being no increases; and

• The Guide which referred to the Rosemount Retirement Benefits Scheme and stated that any increases were at the discretion of the company.

6 CAS-62941-W6P5

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

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

• He had to rely on Capita as a “competent authority”. He should not have to question the accuracy of the information that it provided. It had a duty of care when dealing with him.

• While active members of the Plan received a better level of service, as a preserved member, he found Capita very difficult to deal with. He did not automatically receive annual deferred statements. He had to request these, and they were not always correct.

• The Adjudicator’s Opinion did not entirely reflect his experience of having to deal with all the issues over the timescale involved. The offer from the Trustee of £1,000 was derisory in the light of the years of frustration and inconvenience he had suffered when dealing with Capita.

• Having searched the internet, he found no evidence that pension administrators are entitled to use the latest tranche of pension to provide the PCLS.

• Using the index linked element of his pension to partly provide his PCLS was advantageous to the Trustee as it did not have to increase his residual pension each year. It was disadvantageous to him as the value of his pension would be reduced over time by inflation. 7 CAS-62941-W6P5

Ombudsman’s decision

8 CAS-62941-W6P5

I do not uphold Mr T’s complaint.

Anthony Arter CBE

Deputy Pensions Ombudsman 25 October 2023

9 CAS-62941-W6P5 Appendix 1 Extracts from the documentation referred to by Mr T

The Deferred Document:

“Increases to your Pension once in Payment

Your pension in respect of pre 6 April 1997 service may be increased at the discretion of the Trustee.”

“How will my pension increase once it is in payment?

Your pension, in excess of your Guaranteed Minimum pension, will be increased by the Plan each PI month as follows:

Pension Accrued Before 6 April 1997

Increase Amount In line with the Consumer Prices Index (CPI), to a maximum of 5.00%"

“All pensions in payment will be reviewed each year.”

“Any additional increases are awarded at the discretion of the Company.”

10 CAS-62941-W6P5 Appendix 2 Extract from the Emerson UK Pension Plan Sub-Rules dated 20 June 2012

“Appendix 9 – Fisher-Rosemount (Emerson Process Management) […]

7. Payment of Pensions

Rule 7 shall apply […]”

Extract from the Emerson UK Pension Plan Trust Deed and Rules dated 20 June 2012

“7. Payment of Pensions; Pension Increases […]

7.2 Fixed Pension Increases

7.2.1 Subject to Rule 7.2.2 and to satisfying the requirements of Section 51 of the PA 1995 in respect of Pensionable Service accrued by a Member after 5 April 1997, each pension in payment under the Plan shall increase to the extent (if any) specified in the Appendix to which the Member belongs or as otherwise determined by the Trustee and notified to the Member.

7.2.2 Where provision is made in an Appendix for increases to pension in payment, notwithstanding anything to the contrary in the provisions of the Plan, any pension in payment in respect of Pensionable Service accrued by a Member on a defined benefit basis on or after 6 April 2009 shall be subject to a maximum increase of 2.5% per annum.

7.3 Discretionary Pension Increases

Pensions in payment, in excess of any Guaranteed Minimum Pensions, shall be reviewed from time to time by the Principal Company and the Principal Company may (having regards to Actuarial Advice, the rise in the Index and the financial state of the Fund) direct that a pension shall be increased, subject to Inland Revenue Limits or, as appropriate, Schedule 7 (Overriding Benefit Provisions).”

11