Referral to the Pension Protection Fund Ombudsman – The case study of Mr N

Mr N made a referral of a reviewable matter to the PPF Ombudsman in relation to an entitlement to enhanced early retirement benefits.

Mr N became a deferred member of his employer’s occupational pension scheme (the Scheme) in August 1995. At the time, the Scheme rules stated that, with the consent of the employer, a man at age 60 could request early payment of his deferred benefits (which would normally be payable from age 65).

However, the 1994 valuation showed the Scheme to be in surplus, so in order to comply with tax legislation at the time, the Trustees put in place a remedial plan. Amongst other things, the remedial plan referred to the steps taken to equalise retirement ages for men and women. Normal retirement age had been equalised from May 1995. It stated men now had the right to retire at age 60 without employer consent but only pension accrued between May 1990 and May 1995 would not be reduced for early payment.

Mr N contacted the Scheme in September 1999 as he was turning 60 and wanted information about his pension options. He was advised of two options, but this was only if the consent to retire early was granted by the employer. Mr N was informed in December 1999 that the Trustees had consented, but as the employer had gone into administration, employer consent was required from the company administrator.

Following this, an Independent Trustee was appointed, who was unsure if the power to grant consent rested with the employer (now the administrator) or itself. Legal advice was sought and the administrator was asked to provide consent, but in the meantime, Mr N was offered the option of taking a lower pension and lump sum whilst the matter of consent was clarified.

In September 2012, the Independent Trustee wrote to Mr N to say that legal advice had confirmed that consent to early retirement could only come from the employer. As the employer had gone into liquidation in 2011 there was no prospect of consent being given and, subject to PPF compensation rules, Mr N would continue to receive his benefits in line with what was set up in 2001. The Scheme entered the PPF in April 2014.

Mr N asked the PPF Board to consider his entitlement to increased benefits. The PPF Board’s Reconsideration Committee rejected the claim, essentially because there was not an unconditional promise that if Mr N accepted the lower amount that he would later be entitled to enhanced early retirement benefits.

The Ombudsman did not uphold the referral on the basis that the Reconsideration Committee appeared to have considered Mr N’s claim to increased benefits on the grounds that he had relied on incorrect information, but that this claim was unlikely to succeed because the information provided by the Independent Trustee was correct. At the time Mr N took his benefits, he was fully aware that there was an issue relating to the giving of consent. While he may have hoped that such consent would be forthcoming, the Ombudsman did not consider that he could reasonably believe that, without such consent, an unreduced pension would be paid. The Ombudsman concluded that when the Scheme entered the PPF, Mr N became eligible for PPF compensation. This compensation is based on the pension he was entitled to under the rules of the Scheme and, in taking his benefits early without the consent of the employer, Mr N is only entitled to the reduced benefits.  

Related determinations

• The Pension Protection Fund (PPFO-12943)