Wales And West Utilities Pension Scheme · CAS-44498-B3X0

CAS-44498-B3X0

Ombudsman’s Determination Applicant Mr T

Scheme Wales and West Utilities Pension Scheme (the Scheme)

Respondent The Trustee of Wales and West Utilities Pension Scheme (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties Mr T was an active member of the Scheme until he opted out on 20 June 2018.

“As an illustration, the estimated transfer value based on your accrued pension as at 5 April 2017 is about:

£630,000

This figure is only an indicative estimate of the size of your transfer value as at 5 April 2017 and is not guaranteed. You should not make any financial decisions solely on the basis of this illustration.

In particular the actual amount will vary over time and in future the value could be substantially higher or lower than the figure above. It depends on a range of factors, including

• financial market conditions when it is calculated;

1 CAS-44498-B3X0 • the level of benefits you build up in the Scheme;

• the statutory requirements that apply for the calculation at the time of transfer, and how those requirements are applied by the Trustee of the Scheme.”

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4 CAS-44498-B3X0 Adjudicator’s Opinion

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• The CETV, quoted in the 2017 ABS, was only indicative to the extent that there may be future changes in the financial markets. However, the value of his CETV changed as a result of an amendment to the assumptions used to calculate the CETV. This had taken “money” away from him.

• He could not see how the Adjudicator could agree that it was right to change the assumptions used to calculate CETVs without notifying members. In his view, this was a “deplorable” way to conduct business.

• The change to the assumptions used to calculate CETVs targeted older members; this was also a “deplorable act” and amounted to age discrimination.

I note the additional points made by Mr T which do not change the outcome. I agree with the Adjudicator’s Opinion.

Ombudsman’s decision Mr T’s position is that he was treated unfairly when the Trustee changed the assumptions used to calculate CETVs. He is concerned that CETVs for other Scheme members increased while his CETV reduced in value.

I acknowledge that Mr T was disappointed when his CETV went down from the estimated value quoted in his 2017 ABS. It is clear that the figure given in the 2017 ABS was an estimate and did not give rise to an entitlement to take the figure quoted to him. Mr T was provided with caveats in the accompanying notes that made it

6 CAS-44498-B3X0 sufficiently clear that he should not rely on the CETV estimate when making financial decisions. It was also made clear that the subsequent CETV illustrations, provided in February and May 2018, were also estimates and were not guaranteed.

The Trustee updated the assumptions used in the calculation of CETVs in February 2018, following a change to the Scheme’s investment strategy. This does not amount to maladministration and is in keeping with the proper and efficient management of a pension arrangement. The Trustee has a fiduciary duty to manage the Scheme’s investments and secure sufficient assets for payment of retirement benefits. To perform this duty, it must ensure that it only pays CETVs that reflect the correct member benefits within the Scheme. Payment of any CETV, above its true value, would erode the assets available to pay retirement benefits.

The Trustee was entitled to make changes to the underlying assumptions used to calculate CETVs following actuarial advice. It was reasonable for the Trustee to do so taking account of the changes to the Scheme’s investment strategy.

Mr T has said that the Trustee should have told members that the assumptions were under review. I am mindful that there was no duty on the Trustee to notify members that it was reviewing the CETV assumptions as this is within the normal functions of a trustee. It is important to note that trustees of defined benefit schemes will undertake a review of the scheme’s actuarial factors from time to time.

In the absence of any statutory duty on trustees to inform members regarding changes to assumptions used in the calculation of CETVs, the Trustee’s action in this case do not amount to maladministration.

Mr T considers that he has been treated unfairly as his CETV reduced while CETVs for other members of the Scheme increased during the same period. On reviewing the evidence, I do not find that the Trustee has miscalculated his CETV. A CETV is a value determined by actuarial principles, which requires assumptions to be made about the future course of events affecting the Scheme and the member’s benefits. As each member’s benefits and circumstance vary, it follows that the value of the CETV in respect of each member will vary accordingly.

Mr T has argued that the November 2017 Letter meant that no change could be made to the CETV basis.

I find that the change to the CETV assumptions did not alter the Scheme and Mr T’s pension benefits remained unchanged. Had his benefits remained in the Scheme, his pension payable on retirement would not have been impacted by the change in the CETV assumptions.

Mr T was entitled to a guaranteed CETV once he had opted out of the Scheme and became a deferred member. He was provided with the Leaver Pack, which set out his options, including the option to remain in the Scheme. Following advice from the IFA, Mr T transferred his pension benefits in full knowledge that his CETV was lower than the estimated figures quoted to him in 2017 and early 2018. Having reviewed the 7 CAS-44498-B3X0 evidence, I do not find that there are any grounds for me to direct the Trustee to augment his CETV or reverse the transfer. I am satisfied that Mr T’s CETV was calculated in accordance with the correct calculation basis and assumptions in force at the time.

I do not uphold Mr T’s complaint.

Anthony Arter

Pensions Ombudsman 27 January 2022

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