Member communications and the need for employers to provide key pensions information brought into focus in a recent determination by the Pensions Ombudsman.
A recent determination by the Pensions Ombudsman against the Police and Crime Commissioner of South Wales and pension administrator Capita has brought member communication obligations into sharper focus.
The Ombudsman decided on 22 December 2015 (PO-7096) that the Police and Crime Commissioner had a duty of care to provide a police officer with relevant information about the tax penalties on his retirement benefits if he were re-employed within a month of becoming entitled to his Police Pension Scheme benefits.
The complainant left police service and took his pension benefits but was re-employed in materially the same role less than a month later. His re-employment resulted in him losing his protected pension age. The effect was to trigger tax charges on his past and future pension payments up to age 55. The Ombudsman acknowledged that an employer has no legal obligation to provide individuals with tax and pension liabilities advice. However, as a "responsible employer" the Commissioner did have a duty of care to provide key information about the tax implications of re-employment. The Commissioner was directed to pay complainant the amount due to HMRC in respect of the loss of protected pension age.
The outcome of this determination (alongside two virtually identical determinations published by the Ombudsman on the same day in relation to complaints by two other members of the Police Pension Scheme) may be contrasted with the earlier August 2014 determination in Ramsey (PO-3290). In that case, the previous Deputy Ombudsman ruled that neither a pension scheme trustee, employer nor administrator had any legal duty to warn a member that the reduction in the annual allowance from 6 April 2011 would make him personally liable for an annual allowance charge if he elected to receive a major enhancement to his scheme benefits after that date.
Ombudsman determinations turn on their facts. However, the recent cases are highly relevant not only to the reduced tax allowances for pensions saving, but also to the permitted define contribution pension flexibilities announced by George Osborne in last year’s budget and which came into effect on 6 April 2015. There is now more than ever, a need for individuals to understand their retirement options and engage with their pensions from an early date if successful outcomes are to be delivered.
We can help you:
- Review and update member information across the whole membership lifecycle, in particular those nearing retirement.
- Consider newsletter or stand-alone updates for all members about the flexibilities offered in your scheme (if any) to encourage members to review investment choices and contribution levels in the light of the new options.
- Document your actions as part of the audit trail to evidence your compliance with disclosure of information regulations, Pensions Regulator codes of practice and guidance.