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13th May 2012

The dangers of incorrect pension quotations

Two recent unreported cases before the Pensions Ombudsman (PO) have highlighted the potential cost to pension schemes where trustees provide scheme members with inaccurate quotations for their future pension benefits.

The first case is Major v B.S. Pension Fund Trustee Ltd. Mr Major took voluntary redundancy aged 62 based on a previous quote from his employer that he would receive early retirement pension benefits almost double the value of what he in fact did later receive. Mr Major argued that he would not have accepted voluntary redundancy and would have carried on working to age 65 had he been availed of the true benefit calculations. The trustees of the scheme admitted maladministration in the benefits quotation but argued, amongst other points, that Mr Major may not have worked to age 65 in any event. The PO found in favour of Mr Major, awarding him £23,481 (net of tax and a redundancy lump sum) to make good his lost salary, plus the difference in pension benefits he would have accrued had he worked to age 65.

The second case is Wheeldon v NHS Business Services Authority (NHSBSA). Dr Wheeldon retired early due to ill-health in 1992 and became entitled to an enhanced ill-health retirement pension of c.£17,000 per annum. He was keen to adequately provide for his wife in the event of his death, therefore he wrote to NHSBSA asking how much pension his wife would receive should he die. NHSBSA told Dr Wheeldon in 1994 that his wife would receive c.£6,500 per annum. Dr Wheeldon relied on this quote when taking extensive steps to order his finances and to make a new will, and he later died in 2008.

After Dr Wheeldon’s death NHSBSA wrote to Mrs Wheeldon and advised that the spouse’s pension quote given in 1994 was inaccurate and should have been approximately 30% less. Dr Wheeldon’s diligent planning and a witness statement from the solicitor who drafted his will helped persuade the PO to order NHSBSA to award Mrs Wheeldon £37,000. The PO felt that had Dr Wheeldon known the true value of the spouse’s pension when drafting his will in 2007, he would have provided more money for Mrs Wheeldon. The figure awarded therefore reflected the extra money the PO felt Dr Wheeldon would have left for Mrs Wheeldon, and also included £2,000 for the delay in her receiving the money.

Both cases highlight how important it is for trustees to provide accurate pensions quotations to members, as the potential cost to the scheme of getting them wrong can be significant, not only in terms of the award to a complainant but also the legal fees incurred in defending a complaint.

For further information, please contact Christopher Nuttall on christophernuttall@hewitsons.com or on 01604 463134

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