The Ombudsman has partly upheld a complaint against a trustee where a member was provided with a benefit statement based on the scheme's late retirement factors at the time, but was neither warned that the late retirement factors could change nor informed when the factors were altered prior to him taking his pension.


The member left his employment in May 1983 and became a deferred member. He was entitled to a pension on reaching his normal retirement age of 60 in May 2007, but chose not to take it until August 2013. He believed, based on a benefit statement from the scheme, that his annual pension would be approximately £9,500, but as a result of a change in the scheme's late retirement factors between the date of provision of the statement and the date when the member started to receive his pension, the annual pension which he actually received was under £9,000.

The member complained that he had been misled about the amount he would receive when he delayed receipt of his pension.

The Ombudsman said that the benefits had been calculated in accordance with the rules and there was no statutory duty to inform members of a change to late retirement factors either before or after the change occurred. However, although there had been no intention to mislead, the effect of the benefit statement had in practice been to mislead the member as to how the pension would be increased as a result of late retirement, as it was not made clear at the time the benefit statement was provided that the actual late retirement pension could be different as a result of a change in late retirement factors.

As a result the member had suffered a "loss of expectation". The Ombudsman ordered the trustee to pay the member £500 compensation for the distress and inconvenience he had suffered as a result of the "loss of expectation".

Comment

There is no statutory duty to inform members of a change to early/late retirement factors. However, where a benefit quotation is provided on the basis of current factors which could change before the pension is actually taken, trustees should warn the member of the potential for the actual pension to be different due to a change in early/late retirement factors.

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