In the case of Mr T (PO-9229), the Deputy Pensions Ombudsman (DPO) has awarded a member £500 for distress and inconvenience where a member received a lower pension than he was expecting after receiving an information sheet which stated that his pension over GMP would be revalued "by at least 3% per annum compound and up to the increase in the Retail Prices Index or 5% per annum compound, whichever is the lower".


The member, who left pensionable service in 2003 at the age of 51, used the information sheet to calculate his expected pension if he remained a deferred member until Normal Retirement Date (NRD) rather than receiving an immediate early retirement pension. 

Shortly before NRD, the member discovered that his pension would be significantly lower than his own calculations had led him to expect. The reason for this was that the member's calculations had been based on year on year increases in deferment whereas the scheme rules followed statutory revaluation methodology in carrying out a "one off" revaluation calculation over the whole period of deferment. The member claimed that the misleading information had led him to the conclusion that leaving his pension in deferment was clearly financially more favourable than taking early retirement, an option which he had therefore not pursued.

The DPO rejected the member's claim that the scheme should pay him a pension calculated on the basis of the misleading information, as the member had not requested an early retirement illustration at the time he received the revaluation information, and was unable to show on the balance of probabilities that he would have taken early retirement had accurate information been provided. However she awarded the member £500 for distress and inconvenience, holding that the information provided about revaluation gave the member the reasonable impression that it could be used to calculate his future benefits when in fact the information was insufficient for this purpose.

Comment

Trustees should be alert to the possibility that information they provide might be used by members to carry out "DIY" benefit calculations. If the information is not suitable for this purpose because it omits points of detail, a prominent statement to this effect should be included. The difference in methodology between the calculation of increases to pensions in payment (year on year) compared with revaluation (single calculation covering a longer period) is a point that is easily overlooked. Trustees should take care to ensure that wording in member literature dealing with revaluation is accurate.

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