Pearson Pension Plan · CAS-78909-Y1F5 — Pensions Ombudsman determination

CAS-78909-Y1F5

Ombudsman’s Determination Applicant Mr L

Scheme The Pearson Pension Plan (the Plan)

Respondent Pearson Pension Trustee Limited (the Trustee)

Outcome I do not uphold Mr L’s complaint, and no further action is required by Trustee.

Complaint summary Mr L’s complaint concerned the Trustee’s failure to fulfil its duty to provide accurate information to him to allow him to plan his retirement. Mr L considers the Trustee’s handling of his complaint was significantly below the level he might reasonably expect.

Background information, including submissions from the parties In October 1975, Mr L’s employer enrolled him into the Plan. It had an Extel Upper Tier section and an Extel Lower Tier section. The contribution rate for the Extel Upper Tier section was 6% of gross salary and for the Extel Lower Tier section it was 3.5% of gross salary. The accrual rate was 1/60th for the Extel Upper Tier section and 1/100th for the Extel Lower Tier section.

Mr L was a member of the Extel Upper Tier section of the Plan from October 1975 to April 1978.

Mr L was then a member of the of the Extel Lower Tier section of the Plan from April 1978 to September 1984.

In 1984, Mr L left his employment with The Pearson Group (the Employer) and he became a deferred member of the Plan.

In December 2010, the Plan’s Administration Team (the Administration Team) sent Mr L a pension illustration of the available options open to Mr L if he were to retire on 25 October 2019. As relevant, the illustration stated:

“Option 1 - Full pension 1

Pearson Pension Trustee Limited CAS-78909-Y1F5 A pension of £16,205.88 a year payable from 25 October 2019.

Option 2 - Maximum tax-free cash with a reduced pension

A maximum tax-free cash sum of £47,139.90 plus a reduced pension of £12,977.16 per year payable with effect from 25 October 2019.

…

Option 3 - Alternative cash option

If you would like to consider taking a lower cash sum….will be happy to provide a revised pension illustration.

This is an illustration based on the current Plan rules, actuarial guidance and HM Revenue & Customs’ practice. It is not a certificate of entitlement. We cannot accept responsibility for any changes which may affect the details shown.”

On 1 October 2012, the Administration Team sent Mr L a pension illustration that set out the same options open to Mr L if he were to retire on 25 October 2019. It also contained the same caveat:

“This is an illustration based on the current Plan rules, actuarial guidance and HM Revenue & Customs’ practice. It is not a certificate of entitlement. We cannot accept responsibility for any changes which may affect the details shown.”

In February 2017, the Administration Team sent an early retirement pension illustration to Mr L. It stated the following options were available to Mr L on 25 October 2017. As relevant the illustration stated:

“Option 1- Full Pension

A pension of £13,264.92 a year payable with effect from 25 October 2017.

Option 2 - Maximum tax-free cash with a reduced pension

A maximum tax-free cash sum of £67,678.80 plus a reduced pension of £10,151.82 a year payable with effect from 25 October 2017.

…

Option 3 - Alternative cash option

If you would like to consider taking a lower cash sum….I’ll be happy to provide a revised Pension Illustration and Pension Option form.

Option 4 -Transfer of Plan Benefits

You could transfer the value of your Plan benefits to another registered pension arrangement. If the transfer is a Defined Contribution arrangement 2 CAS-78909-Y1F5 and the transfer value is above £30,000, we will need to receive confirmation that you have received appropriate independent advice from an authorised financial adviser. If you choose this option, we will send you a transfer statement.

This is an illustration based on the current Plan rules, actuarial guidance and HM Revenue & Customs practice. It is not a certificate of entitlement. We cannot accept responsibility for any changes that may affect the information provided, we will contact you.”

In March 2019, Mr L requested a pension illustration from the Administration Team showing his expected pension benefits at his normal retirement age on 25 October 2019.

On 26 March 2019, the Administration Team sent a pension illustration to Mr L. The statement showed that Mr L’s full annual pension at his 2019 normal retirement date would be £11,108.52. The Administration Team informed Mr L of the following:-

• When it produced a pension illustration at normal retirement age, it reviewed and verified the revaluation applied to a deferred pension.

• In Mr L’s case, the revaluation applied to his earlier statements had incorrectly applied an extra increase to one element of his pension. This led to the Plan’s computer system inflating Mr L’s overall pension figure.

• The Administration Team had corrected the error and it had verified that the enclosed statement was accurate. Mr L should note that the previous statements had been an estimate only and the Plan had not guaranteed the figures shown. It apologised for the errors and inconvenience caused to Mr L.

In April 2019, the Administration Team sent Mr L a pension illustration that incorrectly showed that his full annual pension at his 2019 normal retirement date would be £15,960.12.

On 17 February 2021, following a telephone conversation with Mr L, the Administration Team emailed Mr L a link to its website to enable him to make a complaint under the Plan’s Internal Dispute Resolution Procedure (IDRP).

On 19 February 2021, Mr L submitted a formal complaint to the Trustee under its IDRP. Mr L complained that:

• The Administration Team had incorrectly told him that his full annual pension benefit would be in excess of £16,000.

• However, shortly before his normal retirement age in 2019, the Administration Team then told him it had made errors over a period of time that meant his full annual pension benefit would be £11,108.52.

3 CAS-78909-Y1F5 • Mr L complained that he had made his retirement plans based on the information the Administration Team had given him.

In March 2021, Mr L complained to the Administration Team that its response to his complaint merely repeated its previous responses. Mr L reiterated that he wanted the Trustee to submit a complaint under the Plan’s IDRP.

On 16 March 2021, the Administration Team wrote to Mr L. It said it was sorry that Mr L did not feel that it had fully addressed his complaint and it understood that the incorrect calculations previously issued had caused him distress. The Administration Team appreciated the correct level of benefit payable to Mr L was not what he had expected, however, the Trustee of the Plan was only able pay him the benefit that he was entitled to under the Plan rules. It again gave details of how Mr L could pursue a complaint under the Plan’s IDRP. Enclosed with the letter was a current estimate of benefits for Mr L which showed his available options. As relevant, the illustration stated:

“Option 1 - full pension

A pension of £12,471.09 a year payable with effect from 25 March 2021 and no tax-free cash sum.

Option 2 - maximum tax-free cash with a reduced pension

A maximum tax-free cash sum of £61,870.91 plus a reduced pension of £9,280.64 a year payable from 25 March 2021.

…

Option 3 - transfer benefits from the Plan

Transfer to another arrangement.

On 30 April 2021, the Administration Team spoke to Mr L on the telephone. During the telephone conversation, it confirmed to Mr L that it had wrongly assumed that Mr L had always been a member of the Excel Upper Tier section of the Plan. This caused the error in Mr L’s benefit statements. It was then determined that Mr L had changed to the Excel Lower Tier during his pensionable service. The Administration Team noted that during the telephone conversation, Mr L said he did recall moving to the Excel Lower Tier section of the Plan.

On 4 May 2021, the Trustee sent its response to Mr L’s complaint under its IDRP. It said in summary:-

4 CAS-78909-Y1F5 • It had reviewed the pension illustrations sent to Mr L. The October 2012 and February 2017 retirement illustrations had overstated the benefits payable to Mr L.

• In March 2019, the Administration Team noticed the error when the Plan’s computer system produced another illustration. It corrected Mr L’s calculation and the Administration Team put an explanatory note into his revised illustration.

• The computer system overstated Mr L’s illustrations because the calculation used to determine Mr L’s benefits did not recognise that Mr L had switched from the Excel Upper Tier to the Excel Lower Tier section of the Plan during his pensionable service. Instead, the calculation had wrongly assumed that Mr L had always been a member of the Plan’s Excel Upper Tier.

• It recognised that after the Administration Team corrected Mr L’s illustration the error re-occurred, and it sent him another illustration overstating his benefits.

• The Trustee was sympathetic to Mr L’s circumstances. It acknowledged the error had caused distress to Mr L which the Administration Team had compounded by allowing error to happen again after the correction.

• The Trustee was only able to pay benefits in accordance with the Plan’s Rules, but it was able to offer £1,500 compensation to Mr L for the administration error and the distress he suffered because of the incorrect illustrations.

On 11 May 2021, Mr L emailed the Administration Team to complain about how the Trustee had dealt with his complaint. Mr L made the following additional points:-

• He had received a derisory offer 11 weeks after he made his complaint, on 19 February 2021, with little explanation as to how the offer figure had been determined.

• The IDRP complaint response seemed to trivialise the error on his pension, which its checking procedure had not spotted for a long period of time.

• He questioned whether the Administration Team and/or the Trustee was responsible for a major regulatory breach of its duty of care to Plan members. He said that he was considering complaining to The Pensions Regulator (TPR).

On the same day, the Administration Team replied to Mr L:-

• It had not received Mr L’s complaint letter, dated 19 February 2021, until 3 March 2021, which it then acknowledged on 23 March 2021.

• It apologised that it did not initially treat Mr L’s complaint as an IDRP complaint, but the Trustee did send Mr L its response within eight weeks.

• The Trustee had asked it to telephone Mr L to clarify his recollections as to why he had moved from the Upper Extel section of the Plan to the Lower Extel section of

5 CAS-78909-Y1F5 the Plan. In addition, the Trustee wanted it to inform Mr L that the incorrect pension calculations had occurred because the pension illustration computer system had wrongly assumed that he had been in the Upper Extel section throughout all his pensionable service. It and Mr L had discussed these points during the telephone call on 30 April 2021. It then reported this information to the Trustee prior to the Trustee sending the IDRP complaint response to Mr L.

On 12 May 2021, Mr L emailed the Administration Team. He said he had submitted his complaint on 19 February 2021 to the address the Administration Team had given him and, 11 weeks later, he received the Trustee’s IDRP complaint response. Mr L repeated the points he had made in his 11 May 2021 email to the Administration Team.

Following the complaint being referred to The Pensions Ombudsman (TPO), Mr L and the Trustee made further submissions that have been summarised below.

• His overall complaint was that the Trustee had failed in its duty to provide him with accurate pension estimates, had demonstrated multiple internal process failures, did not respond to his complaint in a timely manner and then made him a derisory offer of compensation.

• The Trustee had not kept accurate records. While the database records were correct, the information sent to him was incorrect.

• He accepted that the Trustee could not alter the Plan’s Rules, but this did not excuse its failure to provide him with a reasonably accurate estimate of his pension.

• There was no information available to him between 2012 and March 2019 to indicate that the pension estimates were wrong.

• He wants a more realistic compensation figure from the Trustee.

• He was unable to mitigate his position and plans because the Administration Team had presented the lower pension to him as an unchangeable sum.

• The higher pension, as estimated between 2012 and 2017, would have been useful to offset medical costs he and his wife had incurred to look after their daughter. He used savings to cover these costs. He also had considered paying school fees for his granddaughter, but he had not done this for several reasons.

• In accordance with TPR’s requirements, it is responsible for ensuring that a member’s data is accurate.

6 CAS-78909-Y1F5 • Mr L’s record was accurate, but the automated retirement calculation run via the computer system was incorrectly adding additional revaluation to his deferred pension from the date of Mr L leaving his employment to his estimated retirement date.

• The Administration Team picked up the error following the calculations and it added a manual indicator to Mr L’s record while it was updating the Plan’s computer systems.

• Prior to picking up the issue, the Administration Team had run calculations for bulk mailing to members coming up to normal retirement age, which included an inflated pension figure. Unfortunately, the Administration Team sent this letter to Mr L which caused him further distress.

• It has a duty to ensure that the Plan paid members the correct level of benefit as set out in the Plan’s Rules and in accordance with legislation.

• It had carefully considered Mr L’s complaint and reviewed the information the Administration Team had provided to Mr L.

• The Administration Team had sent Mr L illustrations that the computer system had overstated; however, they were illustrations and not guaranteed as stated in the illustration correspondence. It had offered Mr L £1,500 in light of the distress caused to him.

Adjudicator’s Opinion

7 CAS-78909-Y1F5

8 CAS-78909-Y1F5 Mr R did not accept the Adjudicator’s Opinion and, in response, he made the following points: -

• He thought that asking people what decisions they would have made in the past, if they had known what they now knew, was unreasonable. The only thing that he could say with any certainty is that he would have transferred his pension pot to a SIPP if he had known that his pension was going to be £11,808.52 rather than £16,205.88. However, that option has become all but impossible in recent years because of the changes in regulatory attitudes to DB pension transfers.

• There appeared to have been a fundamental misunderstanding of his complaint. He had no recollection of asking the Plan to pay him the incorrect pension benefit. His complaint was that the Plan had been shockingly incompetent and had mis- handled the complaint process. It had treated the incorrect illustrations as a data error and offered compensation for what saw as a minor fault on their part.

• The Opinion did not put sufficient weight upon the Plan’s failure to address his complaint in a timely manner, to base its illustrations on HMRC guidance-i.e. not on wrong information and the distress and stress caused by its incorrect illustration. The Plan had not acknowledged that this was a serious matter.

Ombudsman’s decision

9 CAS-78909-Y1F5

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

Camilla Barry

Deputy Pensions Ombudsman

17 September 2025

Full determination