Lv Employee Pension Scheme · CAS-65895-V7X9

CAS-65895-V7X9

Ombudsman’s Determination Applicant Mr K

Scheme The LV= Employee Pension Scheme (the Scheme)

Respondent The LV= Pension Trustee Limited (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties

On 1 April 2008, Mr K commenced employment with Transport Friendly Society (the Employer) and became a member of the Transport Friendly Society Pension Scheme (the Transport Scheme), a defined benefit arrangement.

On 10 March 2015, Willis Towers Watson (WTW), the Scheme’s administrator, sent Mr K a retirement quotation (the March 2015 Quotation) for retirement in July 2016. It quoted benefits including a pension commencement lump sum (PCLS) of £110,489.08 plus an annual pension of £16,573.36 based on a date of leaving pensionable service (DOL) of 19 June 2002.

On 16 March 2015, Mr K telephoned WTW and said he had left pensionable service on 30 January 2004, not in 2002 as stated in the March 2015 Quotation.

1 CAS-65895-V7X9 On 27 May 2015, Mr K telephoned WTW to chase a response to his enquiry and was told that his date of leaving would be amended and a revised retirement quotation sent to him.

Between 20 July 2015 and 7 September 2015, Mr K telephoned WTW on three occasions to chase this information.

On 10 September 2015, WTW sent Mr K a revised retirement quotation (the September 2015 Quotation) for retirement in July 2016. It set out benefits including a PCLS of £126,492.74 plus an annual pension of £18,973.91 based on a DOL of 30 January 2004.

A disclaimer in the 2015 Quotation stated:

“This statement is for information only. We have made every effort to make sure that it is accurate. It is based on the information that is available and the laws in force at the time the statement was produced. If any of the benefits shown are incorrect, this does not mean you are entitled to these benefits as the statement is not binding on the [Trustee].

Your actual benefits will be worked out at the time they are due to be paid, based on the [Scheme’s] Trust Deed and Rules and the laws in force at the time you take your benefits.”

On 27 July 2016, Mr K telephoned WTW and asked for a retirement quotation for benefits from July 2016.

On 3 August 2016, WTW sent Mr K the retirement quotation he had requested (the 2016 Quotation). It quoted benefits including a PCLS of £147,125.34 plus an annual pension of £22,068.80 based on a date of leaving pensionable service of 19 June 2002. The disclaimer that had previously been set out in the 2015 Quotation was also included.

On 15 August 2016, Mr K telephoned WTW to say an incorrect DOL had been quoted in the 2016 Quotation. WTW replied that a revised version of the quotation with new figures would be sent.

On 22 August 2016, WTW sent Mr K a revised version of the 2016 Quotation (the revised 2016 Quotation). It set out benefits including a PCLS of £140,963.78 plus an annual pension of £21,144.56 based on a DOL of 30 January 2004.

On 31 December 2016, Mr K retired under the Transport Scheme.

On 13 August 2019, Mr K telephoned WTW and asked for a retirement quotation for benefits from July 2019.

On 20 August 2019, WTW sent Mr K the requested retirement quotation (the 2019 Quotation). It quoted benefits including a PCLS of £152,323.64 plus an annual pension of £22,848.55. The disclaimer that had previously been included in the 2015 Quotation was also reiterated. 2 CAS-65895-V7X9 On 20 November 2019, Mr K telephoned WTW to ask for a retirement quotation and a retirement claim form to take his benefits under the Scheme from 28 February 2020.

Between 3 January 2020 and 7 February 2020, Mr K telephoned WTW on five occasions to chase these documents.

On 11 February 2020, WTW emailed Mr K and said that while calculating the retirement quotation he had requested in January 2020, a reduction in the figures previously quoted in the 2019 Quotation had been identified. This matter had been referred to WTW’s Actuarial Team (the Actuary) for review.

On 28 February 2020, WTW sent Mr K a retirement claim form and retirement quotation to take his benefits on 28 February 2020 (the 2020 Quotation). It set out benefits including a PCLS of £131,125.63 plus an annual pension of £19,668.84.

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On 26 October 2020, the Trustee wrote to Mr K and said:-

• WTW had sent him several incorrect quotations between 2015 and 2019, including the 2019 Quotation. This had resulted from an error in the calculation basis that was not identified until the 2020 Quotation was being processed. However, the Trustee could only pay benefits in accordance with the Scheme Rules.

• WTW did not respond to his enquiry of 20 November 2019 until 24 February 2020. There was a further delay of nearly a month in responding to his complaint of 3 March 2020 until 2 April 2020. Details of the Scheme’s IDRP were also not provided until 22 April 2020. The service provided by WTW in these instances had been below the expected standard.

• Mr K had expressed a wish to invoke stage one of the IDRP in the email to WTW dated 5 April 2020, but the complaint was only passed to the Trustee on 28 April 2020. He was then provided with the opportunity to submit evidence in support of his claim for financial loss. This had caused a delay that was longer than would normally be expected in responding.

• At the time of his retirement, he had received the 2015 Quotation and the 2016 Quotation, both of which were overstated. He had subsequently received further misinformation regarding his benefit entitlements, including the 2019 Quotation which set out potential benefits including a PCLS of £152,323.64 and an annual pension of £22,848.55.

• His actual benefit entitlements calculated correctly in line with the Scheme Rules, when he retired in February 2020, were a PCLS of £131,125.63 and a pension of £19,668.94 a year. In the circumstances of this case, there was insufficient evidence to conclude that the difference of approximately £21,000 in PCLS and £3,000 a year in pension would have prompted him to delay his retirement in 2016.

6 CAS-65895-V7X9 • He had limited savings when he retired and subsequently exhausted the funds in his stakeholder pension up to the point that the benefits from the Scheme went into payment. However, he had provided no evidence that the previously mentioned sum of £3,000 a year was significant in his retirement plans because of any commitment to regular expenditure that would have meant this funding was necessary for him to be able to retire.

• He had also received a PCLS of £131,125.63 from the Scheme to increase his savings. Further benefits from the Transport Scheme, including a PCLS of approximately £30,808.21 and an annual pension of around £6,646.88, would also enhance his income. Given this, it was likely that he would have made the payments totalling £15,000 to his children, even if the 2019 Quotation had been correct.

• He had suffered from “serious” health issues approaching his retirement in 2016. So, it was reasonable to assume that this was a significant factor in his decision to retire. Due to this point and his financial position, it was likely that he would have retired in 2016, even if the 2015 Quotation and 2016 Quotation had been correct. So, the evidence did not support his claim of financial loss due to relying on the misinformation provided in those documents.

• An award of £2,000 in recognition of the distress and inconvenience caused was appropriate.

On 2 November 2020, Mr K appealed under stage two of the IDRP and said:-

• The ill health he suffered approaching retirement in 2016 was an acute condition, but not ongoing. It merely prompted him to assess the feasibility of early retirement. So, the retirement quotations subsequently provided by WTW were significant in his financial planning.

• As a consequence of the misinformation provided by WTW his retirement income was reduced below the level he had expected, while his expenditure including that required for bills and mortgage payments, continued. So, he needed to seek employment and mitigate the financial loss.

• During some telephone conversations with WTW between November 2019 and February 2020, he was told on several occasions that he was not the only member to have received incorrect retirement quotations. It was unclear how many of the other affected members were receiving benefits that were not in accordance with the Scheme Rules.

On 15 January 2021, the Trustee wrote to Mr K in response and reiterated the information previously provided in the letter dated 26 October 2020. It also said:-

• WTW was responsible for the day-to-day administration of the Scheme, while the Trustee was responsible overall for administration of the Scheme. The incorrect

7 CAS-65895-V7X9 retirement quotations were provided over a lengthy period as a result of an error in a spreadsheet prepared by WTW.

• However, his benefits could only be paid in accordance with the Scheme Rules, especially as he had provided insufficient evidence of incurring a financial loss. The £2,000 award previously offered was appropriate recognition of the distress and inconvenience he had suffered.

Mr K’s position

When he was assessing the feasibility of early retirement in 2015, the net income he required for a comfortable lifestyle was around £40,000 a year.

He did not seek financial advice regarding his financial planning before taking early retirement from the Transport Scheme. However, in 2020 he did create a spreadsheet showing the post-retirement income that he had relied on based on the overstated quotations received between 2015 and 2019.

Those overstated benefits were required so that he can avoid future financial hardship. However, he was currently working on a part-time basis to mitigate the reduced PCLS and pension entitlement from the Scheme.

WTW was, in any case, at fault for providing incorrect benefit details. This misinformation has resulted in him having to continue working after his planned retirement date.

The Trustee’s position

The incorrect retirement quotations sent to Mr K between 2015 and 2019 did not result from incorrect guidance provided to WTW by the Trustee or a misinterpretation of the Scheme Rules by WTW.

The calculations for the 2020 Quotation were completed by WTW’s Administration Team then subsequently reviewed and approved by the Actuary.

Adjudicator’s Opinion

• The Trustee had acknowledged that WTW provided several incorrect retirement quotations to Mr K between 2015 and 2019, including the 2019 Quotation. These errors were not identified until WTW was calculating the 2020 Quotation. In the Adjudicator’s opinion, the initial misinformation provided to Mr K amounted to maladministration by WTW on behalf of the Trustee. 8 CAS-65895-V7X9

• Mr K had provided no evidence of any expenditure or financial commitments that would have precluded him from making the payments to his son and daughter, totalling £15,000. That sum was minimal when compared to the correct PCLS of £131,125.63 and pension of £6,646.88 a year that he eventually claimed in 2020. So, it was not possible to conclude with any certainty that Mr K would not have made the payments totalling £15,000 to his son and daughter if the 2019 Quotation had been correct.

• Mr K had made no claim with regard to lost earnings, despite the fact that his salary was around £100,000 a year when he retired from his role with the Employer in December 2016. In the Adjudicator’s opinion, the difference in figures between the 2019 Quotation and the 2020 Quotation was also significantly less than the potential salary that Mr K could, hypothetically, have earned over a year between December 2016 and December 2017. So, on the balance of probabilities, it was unlikely that Mr K would have made any other decision than to retire at that time, even if the 2015 Quotation had been correct.

• Mr K had contacted WTW on two occasions, in March 2015 and August 2016, to say that he had received retirement quotations based on an incorrect DOL. However, on each occasion he had subsequently received revised figures. Firstly, in the September 2015 Quotation, which was higher that the March 2015 Quotation, and then in the revised August 2016 Quotation which was lower than the August 2016 Quotation. Mr K had subsequently received the 2019 Quotation, which was overstated. So, the Adjudicator did not agree with Mr K’s assertion that ‘the figures provided were consistent.

• Since the incorrect figures provided to Mr K were always subject to review at retirement, he was also never actually entitled to the overstated benefits that were set out in the 2019 Quotation. So, in the Adjudicator’s opinion, Mr K had not incurred an actual financial loss due to the reduced figures confirmed in the 2020 Quotation. That quotation was calculated correctly and in accordance with the Scheme Rules. Rather, Mr K had suffered a loss of expectation when WTW confirmed that the 2019 Quotation had been overstated.

9 CAS-65895-V7X9 • Mr K had experienced lengthy delays while awaiting a response to his enquiries on two occasions. Firstly, following his enquiry of 16 March 2015, Mr K did not receive the September 2015 Quotation for almost six months. Then it took until 28 February 2020 for WTW to respond to Mr K’s enquiry of 20 November 2019. In the Adjudicator’s opinion, these instances of poor service amounted to further maladministration by WTW on behalf of the Trustee, in addition to that previously identified. These issues would have caused Mr K severe distress and inconvenience.

• An award of £2,000 was in keeping with the Ombudsman’s guidance for non- financial injustice of this kind. So, in the Adjudicator’s view, the Trustee’s offer of £2,000 to Mr K was sufficient recognition of the distress and inconvenience he had suffered.

The Trustee accepted the Adjudicator’s Opinion, Mr K did not, and the complaint was passed to me to consider. I agree with the Adjudicator’s Opinion and note the additional points raised by Mr K.

Mr K’s additional comments

Having identified the reduction in the value of his benefits in February 2020, WTW said it would liaise with the Actuary and the Trustee to secure a “favourable outcome” for him. This implied that the miscalculation may be subject to interpretation. WTW subsequently provided an explanation, but it remains unclear how the error occurred.

The revised retirement quotations he received following the March 2015 Quotation and the 2016 Quotation were also incorrect. It is unreasonable for the Trustee to repeatedly rely on the disclaimer in his retirement quotations covering a period of over five years.

The figures in these retirement quotations moved in the direction he had expected, due to changes in the DOL and the early retirement factor. On that basis, it would not have been clear that the quoted figures were incorrect. So, he reasonably relied on the information received in making financial decisions.

He suffered ill health in 2014, and subsequently retired under the Transport Scheme on 31 December 2016, based on the misinformation. Had the figures quoted been correct, he would have delayed his retirement from the Transport Scheme.

Having made that decision, he lost a year’s salary and an additional year of pension entitlement. His decision to retire under the Transport Scheme was also made three years before he received further retirement quotations in 2019 and 2020. So, those quotations are irrelevant when considering his retirement under the Transport Scheme in December 2016. He sought clarification regarding his retirement benefits under the Scheme during 2015 and 2016.

The total sum of £15,000 paid to his son and daughter was significant due to the fact that the PCLS paid to him in February 2020 was around £20,000 lower than that

10 CAS-65895-V7X9 quoted in the 2019 Quotation. However, he has also received a pension of £19,668.94 a year from February 2020.

He originally created a spreadsheet in 2015, showing his financial commitments, and that his savings would be used by the time he reaches the state pension age. This would result in him then having no funds to cover emergencies. However, he has been unable to obtain the spreadsheet created in 2015.

Ombudsman’s decision

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I do not uphold Mr K’s complaint.

Dominic Harris

Pensions Ombudsman

28 March 2024

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