The Ombudsman's Annual Report 2000 - 2001

The Pensions Ombudsman's seventh annual report has recently been issued, covering the financial year 2000-2001. This is Dr Farrands final report as his term of office expired at the end of August 2001. He believes that this years most conspicuous success has been significantly reducing the time taken to process cases, with the average for a completed investigation now below 6 months. At the same time, a high output in the number of determinations issued has been maintained.

Performance of the Pensions Ombudsmans Office

The numbers of determinations issued in 2000-2001 were comparable to last year: 605 against 619. This year 3269 initial enquiries were received; remarkably this is exactly the same number as in 1999-2000.

36 per cent of these enquiries were referred directly to the Pensions Advisory Service (OPAS) and only 12 per cent were left wanting to go further but not referred onwards. The most significant reason for rejection of enquiries was that the complaint was not brought within the 3 year statutory time limit.

911 new cases were accepted for investigation during the year, which when added to the 421 cases brought forward from last year (down from 687 in 1999-2000) made the total number of open cases 1,332 for the year. Of these, 704 cases were closed during the course of the year, with 605 of these receiving a formal determination.

Dr Farrand now thinks that his office is "running fairly close to our top speed", having produced Determinations in under 6 months for 74 per cent of the total.

Observations of the Pensions Ombudsman

Preliminary issues

The Ombudsman noted that the number of cases he upheld has steadily dropped since he took office - from 78 per cent in 1994-1995 to 39 per cent this year. He believes that this stems from a restriction of his powers and jurisdiction as a result of court decisions on appeal from his determinations. An additional reason might be that statutory internal dispute resolution procedures are working, so that the majority of those reaching the Ombudsmans office are the unjustifiably dissatisfied.

Subject matter of Determinations

The most common subject matters of complaints determined were

• Ill health benefits (80 determinations)
• Calculation of benefits (72 determinations)
• Membership conditions (39 determinations)
• Winding up (38 determinations).

The only sizeable variation from previous years is the drop in cases relating to winding-up of schemes (down from 97 determinations in 1999-2000). The Ombudsman attributes this to a reduction in the number of complaints related to Century Life schemes. There is almost universal agreement that scheme wind-ups take too long and often leave members with unsatisfactory reductions in benefits.

The Financial Ombudsman Service

Six of the financial services complaints handling bodies are being combined in the new Financial Ombudsman Service (FOS). The Pensions Ombudsmans office is to remain separate from FOS as it is believed that applicants can be best served by a flexible system of cross referral rather than forcing complainants to apply to a central, less expert, entity. To quote Jeff Rooker, the (then) Minister of State with responsibility for Pensions:

"It is important that consumers are clear about whom they should go to for advice and to complain. The common theme is the office of the pensions advisory service. OPAS handles information and guidance concerning personal pensions and occupational schemes, and will cover stakeholder schemes. It is ideally placed to steer consumers toward the most appropriate place for their concerns to be dealt with. Indeed, the Financial Services and Markets Act enables the FOS, with the consent of the complainant, to refer a case to another body, such as the Pensions Ombudsman, for resolution by that body."

"Quinqennial Review"

This review in July 2000, carried out by the DSS, recommended that "consideration is given to the practicalities of a merger (between the Pensions Ombudsmans office and the FOS) in the longer term". The first three recommendations of the review were:

• That a free-to-use service to determine complaints and disputes is retained
• The existing structure of a statutorily appointed Ombudsman is retained
• The Pensions Ombudsmans jurisdiction should be retained in its current form and regularly assessed to ensure that it continues to provide an appropriate route of complaint for members and those running schemes
• Not surprisingly, these were fully endorsed by the Ombudsman.

The Human Rights Act 1998

The Ombudsman noted that the Act has made almost no difference to his offices day to day activities. The Article 6 right to a public oral hearing has been made clear to parties by minor changes in wording of documents. Very few parties have asked for an oral hearing in practice, only three having taken place this year.

Dr Farrand expressed concern over the objection to the very nature of the Ombudsman system based on the Act. One such complaint gives the flavour:

"Firstly, it is common practice to delegate large proportions of work to caseworkers who are appointed by the Ombudsman. As they are not appointed by the Secretary of State or, I believe, closely supervised by the Ombudsman, the involvement appears to breach the fair hearing test. Secondly, the situation is exacerbated by caseworkers effectively having an undue influence on determinations."

The Ombudsman believes that it is an intentional virtue, and not a vice, that he relies on staff to whom work can be delegated. Further, he is sure many commentators are ignorant of his offices workings and may even be confusing delegation with dereliction. In his opinion:

"My caseworkers exist as a cost effective production line for the investigations and Determinations of Dr Farrand. If the wrong product comes off the line, I reject it. If, as is the case, I am able to approve a high proportion, it is because the production line is working well".

Appeals

There were 13 court judgments delivered on appeal from the Ombudsmans determinations this year, compared to 9 last year. In only 3 of these was his determination upheld. The Ombudsman notes the entirely disproportionate impact of the appeals upon the work, and more importantly the budget, of his office. More serious in his opinion, though, is the impact on otherwise successful complainants who see their cases taken from an Ombudsman to a court where they cannot ordinarily afford to participate and often lose.

For further information, please contact Mark Grant by e-mail at [email protected] or by telephone on +44 (0)20 7367 2325.