Nhs Pension Scheme · CAS-88768-M4S0 — Pensions Ombudsman determination

CAS-88768-M4S0

Ombudsman’s Determination Applicant Mr Y

Scheme NHS Pension Scheme (the Scheme)

Respondent NHS Business Services Authority (NHS BSA)

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.

Between 1985 and 1998, Mr Y was in pensionable employment with numerous recognised Employing Authorities within the Scheme. During each period of employment, Mr Y claims to have been an active contributing member of the Scheme. Mr Y says his employment was as follows:-

Employer Start Date End Date 2 Full Years Benefits in of Service? Payment?

Joyce Green 1 April 1985 22 July 1986 No No Hospital

1 CAS-88768-M4S0 Northwest 25 November 22 June 1995 Yes Yes London 1992 Hospital

Eastbourne 1995 1996 No No District Hospital

St Vincent’s 1996 1998 No No Nursing Home

NHS BSA holds the following information regarding Mr Y’s pensionable employment history:-

Employer Start Date End Date 2 Full years Benefits in of Service? Payment

Joyce Green 1 April 1985 8 September No No Hospital 1985

Northwest 25 November 22 June 1995 Yes Yes London 1992 Hospital

Eastbourne 1 April 1995 22 June 1995 No No District Hospital

On 3 February 2020, Mr Y received a letter from NHS BSA detailing his benefit entitlement within the 1995 Section of the Scheme (the 1995 Section). The information showed that he had two years and 210 days of reckonable membership in the Scheme, accrued between 25 November 1992 and 22 June 1995. It also showed that he had received a refund amounting to £156.53 in respect of contributions made between 1980 and 1981.

On 19 March 2020, NHS BSA sent Mr Y a letter detailing his benefits in the Scheme. The information showed:-

• His Pay was £16,898.06.

• His Pension was £950.44 pa.

• His Lump Sum was £2,851.33.

• His total pensionable service was two years and 210 days.

2 CAS-88768-M4S0 On 8 July 2020, Mr Y submitted a complaint under stage one of the Scheme’s Internal Dispute Resolution Procedure (IDRP). He provided documentation that he believed evidenced his employment and National Insurance contributions between 1975 and 2000. He requested that the information be reviewed and the pension contributions he claimed to have made, be recognised and reinstated.

On 18 September 2020, NHS BSA responded to Mr Y’s complaint under stage one of the Scheme’s IDRP. It said:-

• The Scheme was a contracted-out arrangement meaning that whenever he was contributing into the Scheme, he would have been contracted out of the State Pension Scheme.

• From 1975 to 1979 he was not contracted out of the State Pension Scheme, so would not have been actively contributing to the Scheme.

• From 1979 to 1981, the information that he had provided showed that he was contracted out with another external employer.

• He rejoined the Scheme on 1 April 1985 until 22 July 1986. The contributions he had made during this period had been refunded to him and it had no liability for that period of employment.

• Its records showed that the only period of employment for which he was entitled to pension benefits from the Scheme was from 25 November 1992 to 22 June 1995.

On 9 January 2021, Mr Y escalated his complaint under stage two of the Scheme’s IDRP. He said:-

• He requested evidence that he had received a refund of the contributions made during his period of employment with Joyce Green Hospital between 1985 and 1986.

• He requested evidence that he was not a member of the Scheme and a copy of the refund notification.

• He argued that Eastbourne District Hospital had confirmed that he was a member of the Scheme during the tax year 1996 to 1997.

• A letter from the Chief Executive Officer at St Vincent’s Nursing Home showed that he was an employee from 1996 to 1998.

On 4 March 2021, NHS BSA responded to Mr Y’s complaint under stage two of the Scheme’s IDRP. It said:-

• In relation to his Employment with Joyce Green Hospital, it held an RD611 form on file that showed a refund had been made. When it refunded a member’s pension contributions, it also paid a Contributions Equivalent Premium (CEP) to reinstate that member to the relevant State Pension arrangement.

3 CAS-88768-M4S0 • A member paid reduced National Insurance contributions for each period of active pensionable service in the Scheme. A CEP was paid to ensure the member did not miss any State Pension for the period that had been refunded. The CEP would only have been paid for that period if a contributions refund had been issued.

• In relation to his Eastbourne District Hospital employment, the HMRC employment record Mr Y had submitted showed that he made contributions between 1 April 1995 and 22 June 1995. The document showed that he was making reduced National Insurance contributions during that time and would therefore have been a contributing member of the Scheme.

• He was currently in receipt of benefits for the period 25 November 1992 to 22 June 1995. Any contributions made during this period had been maintained as deferred benefits and put into payment on his elected retirement date. There was no evidence to suggest that contributions made during this period should have been refunded.

• In relation to his period of employment with St Vincent’s Hospital, the HMRC document provided by Mr Y confirmed employment between 1996 and 1998. The document also showed that Mr Y was in Category A for State Pension purposes so was paying National Insurance contributions at the standard rate. This meant he was not a member of the Scheme during this period.

• If Mr Y had been making contributions to the Scheme during that period of employment, he would have been in Category D for National Insurance purposes. It was satisfied that he was not, and had never been due a refund as no contribution had been made during that period.

• It was satisfied that his current membership from 25 November 1992 to 22 June 1995 was correct.

Mr Y’s position

Mr Y provided a National Insurance document detailing the contributions he had made to the Scheme during his employment with Eastbourne District Hospital between 1995 and 1996.

Mr Y also provided a letter from St Vincent’s Nursing Home showing that he was an employee during the 1996 to 1997 tax year.

NHS BSA had admitted to contributions being made between 1992 and 1995 but was unable to provide documentary evidence regarding what had happened to them.

If he had received a refund, it would be visible on his State Pension employer contributions record.

He had not received a refund of contributions for the period between 1992 and 1995, and he did not accept that they had gone missing.

4 CAS-88768-M4S0 NHS BSA had failed to track the contributions made, through its own poor record keeping, so the aforementioned contributions should have been transferred into the Scheme, together with compound interest.

Mr Y quoted the following from a complaint that had previously been determined by The Pensions Ombudsman (TPO) [PO-20707]. It stated:-

“HMRC’s approach to “stalemate” enquiries that cannot be resolved where, despite HMRC providing the information it holds on its records, a Scheme still cannot trace an individual as having been a Scheme member, is that the Scheme should accept HMRC records.”

The approach demonstrated in PO-20707 should be adopted by NHS BSA in his case and accept his claim that he had made contributions during each of the periods mentioned.

NHS BSA’s position

NHS BSA has asserted that its response to Mr Y’s complaint under stage two of the Scheme’s IDRP was a full and thorough reflection of its position.

It provided a copy of the evidence that shows a CEP payment was made on 6 September 1986 in relation to his period of pensionable employment with Joyce Green Hospital. This equated to £121.39.

Adjudicator’s Opinion

In support of his complaint Mr Y suggested that his position was similar to a previous determination issued by TPO in 2017.

As part of the investigation into his complaint, Mr Y was asked to provide any supporting evidence that showed he was entitled to the benefits he claimed for the 5 CAS-88768-M4S0 period 1985 to 1998. Mr Y was also asked whether he could provide any evidence that confirmed his commencement dates for the periods he was claiming and any pension statements sent to him when he left active pensionable service. He was also asked to provide anything that might summarise the contributions he made to the Scheme or show the benefits he had accrued as well as any pay slips for the periods in question. Mr Y confirmed that he was unable to provide any further documentary evidence to support his assertions.

Mr Y stated that he had made contributions into the Scheme between 1 April 1985 and 22 June 1986. However, NHS BSA’s records showed that contributions were made between 1 April 1985 and 8 September 1985 only. As there was a lack of documentary evidence to support Mr Y’s assertion that the contributions were made until June 1986 or whether those contributions were refunded, TPO would likely consider the issue on a balance of probabilities basis.

NHS BSA had provided a copy of a RD611 form which was used at the time when a CEP had been authorised and paid. A CEP was only paid when a refund of contributions was issued, to ensure the member did not miss State Pension benefits for the period that was being refunded. The Adjudicator reviewed the RD611 document and although NHS BSA’s records had not explicitly stated that a refund was paid, he considered it likely that Mr Y would have received a refund for that period. The CEP would not have been paid without the accompanying refund as the two processes were intrinsically linked.

Furthermore, it was standard procedure, at the time, that where a member was in active pensionable service for less than two full years, they did not receive entitlement to deferred benefits. In those circumstances, an automatic refund was generally processed. It was worthy of note, that across each period in question, the only period which Mr Y’s contributions were deferred and were now in payment, was 25 November 1992 to 31 March 1995. That was also the only period which exceeded two full years of pensionable service. On the balance of probabilities, it was highly likely that a refund would have been processed for the period 1 April 1985 to 8 September 1985.

Eastbourne District Hospital

Mr Y also argued that he was a contributing member of the Scheme between 1992 and 1995 while employed by Eastbourne District Hospital. The HMRC employment record provided by Mr Y confirmed that he was in pensionable employment until 22 June 1995 but did not confirm his start date. Mr Y was clearly recorded as a Category D National Insurance contributor. He would have been making pension contributions during that period.

The position held by NHS BSA was that Mr Y was already in receipt of benefits for the contributions made between 25 November 1992 and 22 June 1995. Mr Y had stated his pensionable employment with Eastbourne District Hospital commenced 6 CAS-88768-M4S0 from 1 April 1992. Mr Y had not provided any evidence to support that assertion so it could not be said with any degree of certainty that he began contributing to the Scheme prior to 25 November 1992.

Given the lack of evidence provided by Mr Y, on the balance of probabilities, he was already in receipt of the correct benefits accrued during the period 25 November 1992 to 22 June 1995. Therefore, Mr Y would not have been due a refund for the contributions made during his period of employment with Eastbourne District Hospital or for an increase to his pension benefits.

The HMRC employment record clearly displayed that Mr Y was in employment between 1996 and 1998. However, Mr Y was shown as a Category A National Insurance contributor. That meant that for the period in question, Mr Y was not paying reduced National Insurance which confirmed that he was not a member of the Scheme during that period.

Mr Y had provided evidence from the Chief Executive Officer which showed that he was employed by St Vincent’s Nursing Home from 1996 to 1998. However, it did not show that he was a member of the Scheme during that period, only that he was employed. That, in conjunction with the HMRC record, suggested that Mr Y was not a member of the Scheme during that period of employment.

NHS BSA had not disputed whether Mr Y was, or continued to be a Scheme member, as evidenced by the fact that he was already in receipt of pension benefits. The approach adopted by NHS BSA when analysing the employment documents, matched that which HMRC suggested should be used.

In addition, the HMRC employment documents proved when, and with whom, Mr Y was employed. It also displayed which bracket of National Insurance Mr Y was within during those periods of employment. However, the documents did not account for the changes made to Mr Y’s benefit entitlement after initially commencing pensionable employment, such as, if he left employment with less than two years of membership. Since in that event, Mr Y would have lost his entitlement to deferred benefits and would have received an automatic refund, it was for that reason that HMRC records alone were insufficient in proving that additional benefits were due.

7 CAS-88768-M4S0

• Relevant health authorities had provided no records to show him opting out of the Scheme.

• There were no documents produced by any of the health authorities to demonstrate that he was not included in the Schemes.

Ombudsman’s decision Mr Y complained that he did not receive a refund in respect of contributions made into the Scheme during various periods of pensionable employment between 1985 and 1998.

I have carefully reviewed the evidence, the Adjudicator’s Opinion, and Mr Y’s subsequent comments. I have assessed whether, on the balance of probabilities, the actions taken by NHS BSA were correct and reasonable in the circumstances.

Regarding Mr Y’s period of employment at Joyce Green Hospital from April 1985 to July 1986, NHS BSA provided a RD611 form evidencing the CEP paid on 6 September 1986. CEP payments typically are made when refunds of pension contributions are paid cancelling the member’s accrual in the relevant scheme, ensuring no detriment to State Pension entitlement. While NHS BSA’s documentation does not explicitly confirm the refund payment, the two payments are intrinsically linked and payment of one without the other, is extremely unlikely. I find, on the balance of probabilities, that Mr Y received a refund of his contributions for this period, consistent with standard administrative procedures for contracted out pension schemes at that time.

In relation to employment at Eastbourne District Hospital, NHS BSA's records, supported by Mr Y’s HMRC documentation, confirm his membership from 25 November 1992 to 22 June 1995. Despite Mr Y’s assertion that this membership began earlier, no evidence has been provided to support this claim. Therefore, I agree with the Adjudicator’s findings that Mr Y’s pension benefits for this period are correctly calculated and in payment.

Regarding employment with St Vincent’s Nursing Home from 1996 to 1998, the documentation provided, specifically Mr Y’s HMRC records, categorise him as a standard National Insurance contributor (Category A), indicating non-membership of the Scheme. Despite the absence of any original opt-out documentation, the burden of proof to demonstrate pension scheme membership rests with him. In the absence of evidence to the contrary, I must conclude, on the balance of probabilities, that Mr Y was not a contributing member of the Scheme during this period.

8 CAS-88768-M4S0 It is also relevant to consider the statutory provisions and scheme regulations concerning minimum qualifying service. The periods of service Mr Y is claiming membership for span a change in the legislation and Scheme regulations in respect of the minimum service requirement before a scheme had to make provision for members as an ‘early leaver’. ‘Early leaver’ refers to a member leaving employment and/or membership of an occupational pension scheme prior to their normal retirement date.

Schedule 16 of the Social Security Act 1973 (the 1973 Act) (see Appendix One), required occupational pension schemes to preserve a benefit within a scheme for members who were an early leaver where they left scheme employment after attaining age 26 and had at least 5 years of qualifying service. Scheme rules and regulations at the time mirrored the legislation and contribution refunds were issued as a matter of course where this minimum criterion was not met. For the Scheme, Regulation 8 of The National Health Service (Superannuation) Regulations 1980 (the 1980 Regulations) set out the terms on which a member was entitled to a pension (see Appendix Two). It was required that the member had 5 years’ service, or left at age 60. Regulation 37 of the 1980 Regulations dealt with refunds of contributions and sets out that a refund is payable where a member does not become entitled to a pension, such as where their service is less than 5 years.

Schedule 16 of 1973 Act was amended by Part 1, 10 of the Social Security Act 1986 (see Appendix Three), which took effect from 6 April 1988. This reduced the minimum service requirement from 5 years to 2 years qualifying service for benefits to be preserved within an occupational pension scheme. The 1980 Regulations were amended with effect from 6 April 1988 to mirror this legislative change (see Appendix Four).

As such, Mr Y’s period of employment at Joyce Green Hospital from April 1985 to July 1986 was subject to a minimum service requirement of 5 years qualifying service before his benefits could be preserved within the Scheme. The available evidence confirms that Mr Y received a refund of contributions for this period of service which aligns with the legislative requirements at the time. Due to this, I am satisfied that Mr Y is not due a benefit from the Scheme for this period.

Mr Y’s later periods of service were subject to the minimum of 2 years’ qualifying service before the Scheme had to make provision for preservation of his benefits.

In the case of Eastbourne District Hospital, the service from 25 November 1992 to 22 June 1995, did exceed two years, and preserved benefits were therefore appropriately recognised and are now in payment.

Mr Y’s remaining periods of employment are governed by The National Health Service Pension Scheme Regulations 1995 (the 1995 Regulations), which replaced the 1980 Regulations. Regulation L1 of the 1995 Regulations (see Appendix Five) sets out that a member must complete two years of qualifying service in order to become entitled to deferred benefits upon leaving pensionable employment. The

9 CAS-88768-M4S0 Regulations provide for the automatic refund of the member’s own contributions. This approach reflects the standard practice endorsed by most pension schemes at that time.

The rationale behind this rule lies in the administrative efficiency of the Scheme and the minimum legislative requirements for preserving benefits of short-service members. Members with less than two years of qualifying service were not regarded as having accrued sufficient benefits to justify preservation, and so the 1995 Regulations instead ensured that their contributions were returned and that a CEP is paid to HMRC to reinstate the member’s State Pension rights for the contracted-out period. This ensures that the member is not disadvantaged in their wider pension entitlement due to having been contracted out during their brief membership.

Applying this to Mr Y’s case, for the remaining periods of employment, this approach has been adhered to. Eastbourne District Hospital (April to June 1995), and St Vincent’s Nursing Home (1996 to 1998) each involved less than two years of qualifying service. As the accepted practice is reflected in the circumstances of Mr Y’s complaint, on the balance of probabilities, I find that NHS BSA has acted in accordance with the Scheme Regulations and Mr Y is in receipt of his correct benefit entitlement.

Therefore, I do not uphold Mr Y’s complaint.

Camilla Barry

Deputy Pensions Ombudsman 19 June 2025

10 CAS-88768-M4S0

Appendix One

Social Security Act 1973 Schedule 16

Part 1

…

Basic principle as to short service benefit

6 (1) A scheme must provide so that where a member's service in relevant employment is terminated before normal pension age and—

(a) he has attained the age of 26 ; and

(b) he has at least 5 years' qualifying service,

he is entitled to benefit (calculated in accordance with the following provisions of this Schedule and there referred to as "short service benefit "), consisting of or comprising benefit of any description which would have been payable under the scheme as long service benefit, whether for himself or for others.

…

11 CAS-88768-M4S0 Appendix Two

The National Health Service (Superannuation) Regulations 1980 8 Officer's pension and retiring allowance

(1) On ceasing to be an officer, a person shall be entitled to receive from the Secretary of State—

(a) an annual pension if—

(i) he has completed 5 years' service and is permanently incapable of discharging efficiently the duties of his employment by reason of physical or mental infirmity; or

(ii) he has attained the age of 60 years; or

….

37 Return of contributions

(1) Subject to the following provisions of this regulation, a person who on ceasing to be an officer does not become entitled to receive payment of any other benefit under these regulations and who holds no other employment in which he is an officer shall be entitled to receive from the Secretary of State a return of his contributions which, if he is an excepted officer or ceased to be an officer otherwise than at his own request and otherwise than as a result of his misconduct or inefficiency, shall be increased by an amount equal to compound interest thereon:

Provided that no interest shall be added in respect of any period before becoming an officer unless he was subject to an enactment or scheme under which in the circumstances in which he ceased to be an officer his contributions would or might have been returned with interest.

(2) In this regulation the word “contributions ” has the meaning assigned to it by regulation 2(5), but only in so far as any sums included in that definition—

(a) have not been returned to the person or, if they have been returned to him, he has repaid the amount he received and any further amount which he is required under these or the previous regulations to pay, and

(b) are attributable to service which was reckonable under these regulations immediately before he ceased to be an officer and in respect of which he has not become entitled to a benefit under these or the previous regulations and no transfer payment has been paid under those regulations.

12 CAS-88768-M4S0 …

(5) A person shall not be entitled to a return of contributions in respect of any period of service—

(a) after 5th April 1975 (excluding any added years) if on ceasing to be an officer he has attained the age of 26 years and completed 5 years' service after that date;

…

13 CAS-88768-M4S0 Appendix Three

Social Security Act 1986 Part 1

10 Short-service benefit: qualifying service (effective from 6 April 1988)

In paragraphs 6(1)(b) and 7 of Schedule 16 to the [1973 c. 38.] Social Security Act 1973 (preservation of benefits under occupational pension scheme) for " 5 " wherever occurring there shall be substituted " 2 ".

14 CAS-88768-M4S0 Appendix Four

The National Health Service (Superannuation) Regulations 1980 as amended with effect from 6 April 1988 8 Officer's pension and retiring allowance

(1) On ceasing to be an officer, a person shall be entitled to receive from the Secretary of State—

(a) an annual pension if—

(i) he has completed 2 years' service and is permanently incapable of discharging efficiently the duties of his employment by reason of physical or mental infirmity; or

(ii) he has attained the age of 60 years; or

…

37 Return of contributions

(2) In this regulation the word “contributions ” has the meaning assigned to it by regulation 2(5), but only in so far as any sums included in that definition—

15 CAS-88768-M4S0 (5) A person shall not be entitled to a return of contributions in respect of any period of service—

(a) after 5th April 1975 if on ceasing to be an officer he has completed 2 years' service (excluding any added years) subsequent to that date;

…

16 CAS-88768-M4S0 Appendix Five

The National Health Service Pension Scheme Regulations 1995 Part L Early Leavers

L1 Preserved pension

(1) Subject to paragraphs (3) and (4), a member who leaves pensionable employment before age 60 without becoming entitled to a pension under any of regulations E1 to E5 shall be entitled to receive a pension and retirement lump sum under this regulation from age 60 if—

(a) the member leaves with at least 2 years' qualifying service, or

(b) a transfer payment has been made to the scheme in respect of the member’s rights under a personal pension scheme.

(2) The pension under this regulation will be calculated as described in regulation E1 (normal retirement pension) and the retirement lump sum will be calculated as described in regulation E6.

(3) The member shall be entitled to receive the pension and retirement lump sum before age 60 if—

(a) the member is in NHS employment and the Secretary of State is satisfied that the member is suffering from mental or physical infirmity that makes him permanently incapable of efficiently discharging the duties of that employment;

(b) the Secretary of State is satisfied that the member is suffering from mental or physical infirmity that makes him permanently incapable of engaging in regular employment; or

(4) If the member is in NHS employment (whether with the same or another employing authority) when he reaches age 60, the pension and lump sum on retirement will not become payable until the member leaves NHS employment or reaches age 70, whichever is the earlier.

(5) Subject to paragraph (6), where on or after the coming into force of these Regulations a member becomes entitled to a pension under paragraph (3)(a) or (b), the Secretary of State may discharge her liability for that pension by the payment of a lump sum.

(6) A lump sum payment under paragraph (5) may be made only if the Secretary of State is satisfied that it is appropriate in all the circumstances having regard to the life 17 CAS-88768-M4S0

expectancy of the member and the member was in pensionable employment on or after the coming into force of these Regulations.

(7) For the purpose of paragraph (6), the Secretary of State may require whatever medical evidence that she considers necessary.

(8) The amount of the lump sum payable under paragraph (5) will be equal to 5 times the difference between the yearly rate of the member’s pension (calculated in accordance with this regulation) and the yearly rate of the member’s guaranteed minimum pension or, if lower, twice the member’s final year’s pensionable pay (less the member’s lump sum on retirement payable under this regulation) and shall be payable in addition to the lump sum on retirement payable under this regulation, which shall not be subject to any reduction such as is described in regulation E6(3).

Full determination