Teachers Pension Scheme · CAS-32059-B1M3

CAS-32059-B1M3

Ombudsman’s Determination Applicants Mr M N and Mr T N

Scheme Teachers' Pension Scheme (TPS)

Respondent Teachers' Pensions (TP)

Outcome

Complaint summary

Background information, including submissions from the parties

• Mr M N did not introduce himself to TP at the beginning of the call. 1 CAS-32059-B1M3 • He notified TP that: (a) his mother had died on 13 May 2012; (b) she did not leave a surviving spouse; and (c) he and his brother were the joint executors and beneficiaries of their late mother’s estate.

• He asked TP whether there were any outstanding benefits payable from the TPS following his mother’s death.

• TP informed him that a small payment representing Mrs N’s unpaid pension from 4 May to 13 May 2012, was payable and provided him with details on how to claim it.

• TP informed Mr M N three times that it would be sending him an application form (the Form) for completion and return before any payment could be made.

• TP also mentioned that it required sight of a copy of Mrs N’s death certificate.

• Mr M N asked TP to send the Form to him at Mrs N’s home address and understood that he had to complete and return the Form to TP.

• TP advised him to call again if he had any further queries.

“I am sorry to learn of your recent loss. Please accept my condolences.

…we require confirmation of certain details to allow us to pay any benefits that may be due...

The Form should be completed and returned to TP as soon as possible. You should also complete the Certificates Enclosure Form indicating the documents you have sent to us. Please do not delay returning the application form if you are not in possession of all certificates.”

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“Since my mother passed away…it has only come to my attention that both my brother…and I, as executors and beneficiaries of her estate, are entitled to the Death Grant payable on our mother’s Teachers Pension.

Having spoken with […] TP…she has advised me that, given the time since you were initially informed of my mother’s passing… a cover letter…would be necessary in order to claim the amount in full.

Given that my mother died within five years of her pension in payment, I understand the figure to be equivalent to five times the annual pension less any annual pension received prior to my mother’s death…

[…] TP also suggested…that she believed it may be the case that a claim would need to have been made within two years of a member’s death…to receive a full payment….

This is of great concern to us given that my brother and I have not received any notification of our entitlement to this Death Grant, let alone any stipulation regarding timeframe. From the research we have done since being made aware of our entitlement to the Death Grant, there appears to be no mention on your website of any such requirement.

To support our application for the full tax-exempt amount due, I also wanted to provide some context as to why we are only now applying for the grant.

At the time of my mother’s death, she was living in a rented property in Cheshire…the landlord required the property to be emptied and returned to the rental market quickly following her death. We did this, taking my mother’s belongings to my home in Warwickshire and to my brother’s home in Edinburgh.

This was an incredibly stressful period for my brother and I, and despite leaving forwarding addresses we did not receive any post that was sent to her property after her death, including we assume the Teachers’ Pensions Bereavement pack…

Had we received the pack we would certainly have acted upon it at the time rather than now.

To compound the pressure of watching our mother deteriorate and die from a horrific disease…my brother was taken to hospital not long after my mother’s funeral with an unexplained broken femur.

Clearly this did not help our endeavours to manage the closure of her estate. His resulting time in hospital saw him being tested for potential bone cancer 3 CAS-32059-B1M3 which given the reasons for my mother’s death caused a phenomenal amount of additional stress on all of us and in hindsight, is the likely reason for our oversight in pursuing the claim.

Regrettably, with everything else that was happening in a concentrated and complicated period we’ve clearly overlooked items which should have been dealt with as a formality.

We now deeply regret not having professional support at the time…

We therefore respectfully request that you consider the extenuating circumstances outlined above and advise on the process for us to obtain the full tax-exempt amount due from our late mother’s Teachers’ Pension Death Grant.”

• The Death Grant of £46,794.22 was payable in addition to the residual pension arrears of £462.68.

• As payment of the Death Grant was being made more than two years after TP was first notified of Mrs N’s death, HMRC would treat it as “unauthorised” and taxable at 45%.

• TP would arrange for the tax to be paid directly to HMRC.

• The net Death Grant after deduction of tax was £25,736.83.

• It required a letter supplying relevant details of the recipient(s) of the Death Grant signed by the parties named on the grant of probate before it could arrange payment.

“Under HMRC rules, registered pension schemes qualify for tax relief and exemptions…the tax rules for registered pension schemes put conditions on the types of payments that can be made to or in respect of the members of such schemes…Payments that do not fall within these conditions are called unauthorised member payments…

Under paragraph 13 of Schedule 29 of the Finance Act 2004 13(1) a lump sum death benefit is a defined benefits lump sum death benefit if…:

But in a case where the member had not reached the age of 75 at the date of the member’s death, a lump sum death benefit is a defined benefits lump sum death benefit only if it is paid before the end of the relevant two-year period. 4 CAS-32059-B1M3 “The relevant two-year period” means the period of two years beginning with the earlier of the day on which the scheme administrator first knew of the member’s death and the day on which the scheme administrator could first reasonably be expected to have known of it.

If the lump sum death benefit is paid later than two years after the earlier of the two days, it will not be a defined benefits lump sum death benefit and (unless it falls within the definition of one of the other authorised lump sum death benefits) will be an unauthorised member payment. Unauthorised payments are subject to a tax charge…

The notes included with the Form, which beneficiaries are requested to read, state that “the payment of the death lump sum must be paid within two years of the date of death. It is therefore important that TP are provided with all the information required as soon as possible.”

I note that it took over six years from Mrs N’s date of death for the completed Form to be received. Until the Form was received on 1 March 2019, TP were unable to ascertain the level of benefits due. On receipt of this information it became apparent that the Death Grant would be subject to a tax charge. TP do not chase up death notifications until we receive written confirmation and a death certificate, as we are unaware as to who is dealing with the estate. There is no evidence on our records that anyone contacted TP to follow up the death notification…

There is no interest payable in the Death Grant, as this is applicable if TP are at fault and have caused delays in making payment. This however would be paid at the Bank of England current interest rate and not at 8%.

The Form and notes provide guidance and detail the procedure to follow when one of the members pass away. Information can also be found on our website…We also have a dedicated Contact Centre who will offer support and guidance if required.

Once the Form has been received by TP, we would then be able to follow up the case if no further correspondence has been received. This ensures that payments are made in a timely manner.”

“I appreciate that you contend that you and your brother did not receive the Pack in 2012 and therefore not made aware of the possibility of receiving a Death Grant payment and the effect of delay in completing the process…it is

5 CAS-32059-B1M3 more likely than not that the TP representative would have explained that death benefits may be due and that they would be sending paperwork to an agreed address to begin the process of applying for these. In these circumstances, an action lay with you and your brother to either complete the expected paperwork or to contact TP again if you did not receive the paperwork that they sent out. However, I do not see that this would have changed the outcome in this case, as neither you nor your brother received the original paperwork sent to your mother’s address and therefore further correspondence sent to that address would also have been unlikely to reach you.

…TP have acted correctly in sending the death benefits paperwork to the address indicated, and that the explanatory notes that were contained within this paperwork explained the need to complete the process before the deadline set by HMRC was reached. Having passed that deadline some time ago…TP are correct in applying the HMRC surcharge before paying over the residue benefits. If you consider that the HMRC surcharge should not apply in this case, you must approach HMRC in regard of this matter.”

Despite their request for evidence, TP had not been able to provide anything to support its assertion that the Pack, including the Form, was sent to their late mother’s home in May 2012. In their view, TP did not send it. They would have received the Pack if TP had done so because they had access to the property at the time for a short period and then had a mail relocation which was in place until January 2013.

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The Applicants say that:

“We find it appalling that serious “life events” we experienced are being used as a contemptible smokescreen to cover up the multiple failings by TP. Our personal circumstances at an horrific time in our lives are…discrete from the systemic failure in processes at TP…

We were told that there was a residual pension of a few days, and it is completely unacceptable for us to be made to feel like the guilty party for not following up on what we were led to believe was only a few hundred pounds.”

The Applicants letter dated 25 February 2019, explaining the mitigating circumstances behind the late application for the Death Grant, should not be taken as “an admission of fault”.

The “overwhelming failings” of TP significantly outweigh any error on their part.

TP has a duty of care to ensure that the Applicants received the full Death Grant available without any tax charge applied to it. TP failed to provide “adequate information or procedural competence” to ensure that the Applicants were able to claim the Death Grant in full and the Applicants are now being unfairly penalised for TP’s shortcomings.

It should not be the Applicants responsibility to appeal to HMRC for the “unfair” tax charge to be waived. The administrative and procedural failings of TP caused the unfortunate position in which the Applicants find themselves and TP should be held accountable for putting matters right.

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• TP’s own key performance indicators (KPI) and service level agreements (SLA), agreed with the Department for Education, showed significant failings in TP’s administration of death benefits.

• In May 2012 TP was performing at a level of only 86% against a 100% target for dealing with death benefits claims.

• In May 2007 TP was experiencing personnel issues which affected its performance. This suggested that the team responsible for the administration of death benefits was underperforming and not delivering, according to TP’s own targets.

• The team responsible for the administration of death benefits required training and restructuring during this period to improve the KPI and SLA statistics.

• New management was also brought in to run this team given its “failings”.

• System downtime was occurring which also significantly impacted on this team’s performance.

• TP’s own records describe sustained significant failings of the team dealing with death benefit cases at the time.

“Given the …evidence, it is clear that there were systemic procedural and administrative errors internal to TP which greatly impacted on their ability to successfully administer the bereavement process during the time we were engaging with them to inform them of our mothers’ death.

It is clear that, as they were failing to achieve their 100% target of issuing the bereavement pack within one working day of being informed of a member’s death and all SLA and KPI measures related to this were significantly under- performing over this time, we have been significantly disadvantaged by their underperformance.

8 CAS-32059-B1M3 Given this new information above, we would like to once again politely request that TP recognise their failings…and acknowledge…that we were disadvantaged thorough this and that they should now return us to the position we would have been in had we been able to claim the death benefit in full in 2012.”

TP’s Position

The January 2011 version of the leaflet* entitled “Survivor and Death Benefits” containing information about a supplementary death grant and potential tax charges affecting death grants was available on its website in 2012.

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Adjudicator’s Opinion

• Having listened carefully to the telephone recording of the call made on 17 May 2012, although Mr M N did not explicitly introduce himself at the beginning of the call, the Adjudicator was satisfied that during the conversation:-

1. TP became aware that that it was speaking with a close family member of the late Mrs N.

2. TP was told by Mr M N that he and his brother were the joint executors and beneficiaries of their late mother’s estate.

• Mr M N had asked TP for information about any benefits payable from the TPS.

• By looking at its records for Mrs N during the call, TP was able to ascertain that a small residual payment representing her unpaid pension from 4 May to 13 May 2012 was available.

• However, TP regrettably failed to mention that if Mrs N had died before she had been retired for five years, the rest of the pension payments which she would have received would be payable as a Death Grant.

• In the Adjudicator’s view, it would have been inappropriate for TP to have given monetary values for the death benefits payable, but failing to mention the possible payment of the Death Grant to Mr M N during the call was an oversight.

• This oversight would have been easily rectified if the Pack, which TP sent to Mr M N, had safely arrived at its intended destination.

• It would clearly have been better for Mr M N to have asked TP to send the Pack to his home address instead of his late mother’s, particularly when he lived so far away from her and formal redirection of post was not established with Royal Mail

11 CAS-32059-B1M3 until 5 July 2012, some one and a half months after TP had sent the Pack on 17 May 2012.

• It was poor administrative practice on the part of TP in not sending at least one reminder letter to Mr M N at his late mother’s home seeking a response when it had not heard from him after waiting a reasonable amount of time.

• Regrettably, letters do get lost during transit in the postal system. It was therefore reasonable to expect TP to have checked whether Mr M N had received the Pack rather than solely relying on the Applicants to notify safe receipt, especially if it had been sent using standard post.

• TP contended that, even if it had sent a reminder letter to Mr M N at his late mother’s home address, it was unlikely that he would have received it given that he did not receive the Pack. The Adjudicator dismissed this argument as conjecture.

• The Applicants had access to all mail delivered to their late mother’s address and a formal mail redirection was in place for a reasonable period following their mother’s death. In the Adjudicator’s view, there was consequently merit to the Applicants’ objection of TP’s view that any follow up letter would also have been unlikely to have reached them.

• By not following up to ensure that Mr M N safely received the information contained in the Pack meant that the Applicants were heavily reliant on the general information given about death benefits during the telephone conversation on 17 May 2012. The information provided in the initial telephone conversation was not as complete as it might otherwise have been.

• In the Adjudicator’s view, TP’s shortcomings were not the main reason for the unfortunate circumstances which the Applicants now found themselves. As TP has pointed out, Mr T N had admitted, in his letter dated 25 February 2019, that the considerable stress caused by his mother’s death and his brother’s hospitalisation, with hindsight, was the likely reason for their oversight in not pursuing a claim “which should have been dealt with as a formality”.

• Furthermore, it could not be disregarded that (a) TP had made it clear to Mr M N during the telephone call that it required the return of the completed Form and sight of the requested documentation in order to pay the outstanding residual pension due and (b) Mr M N confirmed his understanding of TP’s requirements at the end of the call.

• While applying for this small payment would clearly not have been a priority for the Applicants in light of their extremely stressful personal circumstances at the time, in the Adjudicator’s view, it was reasonable to expect that when their situation 12 CAS-32059-B1M3 improved, they would have resumed their application for payment and by doing so, would have learnt about the availability of the Death Grant and the two-year deadline.

• The Adjudicator concurred with the Applicants that there had been shortcomings in TP’s administrative procedures while dealing with their death benefits claim, but he was unable to conclude that the financial loss which they will suffer by having to pay HMRC the 45% unauthorised payments charge was caused by TP.

• The Applicants have clearly suffered serious distress and inconvenience because of maladministration on the part of TP.

• It was the Adjudicator’s opinion that this complaint should be partly upheld and to put matters right, TP should award the Applicants a payment of £1,000 in recognition of the serious distress and inconvenience which they have experienced in dealing with this matter.

The Applicants did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. The Applicants provided their further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the additional points raised by the Applicants.

Ombudsman’s decision

13 CAS-32059-B1M3 However, potential payments due as a result of the death of a member can vary markedly depending on the member’s individual circumstances and it will have been difficult to impart all the possible permutations regarding any residual benefits in a single telephone conversation. Unfortunately, in this case the TP call handler neglected to provide information regarding any potential Death Grant. To safeguard against such omissions, TP has a process to provide full written details of all the benefits available, including the Death Grant, to potential beneficiaries. This information, and the necessary paperwork to apply for payment, were included, as standard, in the Pack sent by TP to Mr M N with its covering letter on 17 May 2012. I also note from the telephone conversation that Mr M N was clearly told about the Pack and he confirmed that he was happy for it to be issued to his late mother’s home address. He was also asked to provide a copy of the Death Certificate.

The Applicants have confirmed that a mail redirect was set up on 5 July 2012. This was around one and a half months after Mrs N had died.

Given that the Pack apparently did not arrive at its intended destination does not necessarily mean that it was not sent by TP on or around 17 May 2012, as the Applicants clearly believe. It could have been sent and then lost in transit in the postal system. Alternatively, having safely arrived, and predating the commencement of the mail redirect, the landlord could have failed to forward the Pack to Mr M N. TP may not have been able to provide clear evidence that the Pack was sent but this does not rule out these possibilities.

I accept that the evidence which the Applicants obtained from the Department for Education following their freedom of information request clearly demonstrates that TP had been experiencing administrative difficulties dealing with death claims during the period when the events which the Applicants have complained about took place.

However, my decision is based on the evidence directly applicable to this specific case and not on general information concerning the overall performance of TP on bereavement cases at the time. Although, TP are unable to provide explicit proof of postage that confirms that it had sent the Pack to Mrs N’s home, as instructed by Mr M N, I can see no reason why it would not have done this correctly having generated the Pack on its systems. On the balance of probabilities, it is therefore my view that the Pack was most likely lost during transit in the postal system and TP cannot be blamed for this.

Having established that, on the balance of probabilities, the Pack was sent I consider that it was poor administrative practice on the part of TP in not sending at least one reminder letter to Mr M N when it had not received a reply from him after waiting a reasonable period of time, especially as the death certificate was outstanding during this period. It is reasonable to expect TP to have checked with Mr M N whether he had received the Pack rather than solely relying on him or his brother to confirm safe receipt of the Pack. In my view, this is not maladministration but a shortcoming in the administrative process in place at the time. In the same way, having been told that the Pack would be sent, Mr M N could have approached TP to make further 14 CAS-32059-B1M3 enquiries. I accept however that his health concerns at the time would have meant this was less of a priority than it might otherwise have been.

Without a follow up letter once the Pack had been issued, the Applicants had to rely on the general information about death benefits given during the telephone conversation on 17 May 2012, or on TP’s website. The information provided during the telephone call was unfortunately not as complete as it might otherwise have been.

However, TP had made it clear to Mr M N during the telephone call on 17 May 2012 that it required the return of the completed Form and sight of the death certificate in order to pay the outstanding residual pension due and Mr M N confirmed his understanding of this. So even without the Pack, the Applicants should reasonably have been aware that further action was required by them.

I accept that given the stressful personal circumstances for the Applicants at the time, it is understandable that applying for this small payment would clearly not have been a priority. However, I consider that it was reasonable to expect that when their situation improved, they would, in their capacity as executors, have resumed their application for payment as soon as possible. If the Applicants had done so, they would then have subsequently learnt about the availability of the Death Grant and the two-year deadline.

It is also unfortunate that the Applicants chose not to seek legal or independent financial advice which could have resulted in them learning about the availability of the Death Grant in the TPS much earlier.

I agree with the Adjudicator that it was not TP’s shortcomings that led directly to a late application for the Death Grant. I do not consider that the financial loss which they will suffer by having to pay HMRC the 45% unauthorised payments charge can be attributable to TP.

It is evident, however, that the Applicants have suffered serious distress and inconvenience because of TP’s maladministration (see paragraph 61 above) for which they should receive an appropriate award.

The complaint is partly upheld against TP and I make the appropriate direction below.

Directions Within 14 days of the date of this Determination, Teachers Pensions shall pay Mr M N and Mr T N £500 each, that is £1,000 in total, in recognition of the serious distress and inconvenience which they have experienced in dealing with this matter.

Anthony Arter

Pensions Ombudsman 18 December 2020

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