Early retirement factors and scheme rules 2

Reference: M00081

The member received a written quotation for an immediate pension to commence on 30 November 1998, when his employment with the company was due to cease. On 14 December 1998, he received a quotation for a deferred pension at age 60. Two years later, he requested an updated quote, which was much lower than that quoted in December 1998.

The member argued that no information was provided that indicated that the retirement factor explained in the Plan booklet would not apply to a deferred member. The Ombudsman’s analysis was as follows:

“17 The Plan booklet stated that a member's pension would be reduced by 4% for each year between the ages of 55 and 65. There was nothing in the booklet to indicate that this reduction applies only to members retiring early from active service. Therefore, it was not unreasonable for Mr Conniss to have believed that this reduction would apply in his case. However, it is the Rules and not the booklet that governs entitlement under the Plan.

18 The 1992 Rules, applicable at the time Mr Conniss left the service of the Company, provide that it is for the Trustees to decide, subject to confirmation by the actuary as reasonable, the reduction applicable for a member retiring early from service with the company. There was nothing in this document to indicate the reduction that would apply for deferred members. The 2000 Rules provide that in respect of deferred members the Trustees will decide the amount of pension payable, and the actuary will calculate the benefit payable. Therefore, there is nothing in either the 1992 or 2000 Rules that states specifically the rates of reduction that should be apply in the case of deferred members under the Plan who take their benefits early. The reduction applied is at the discretion of the Trustees and confirmed by the actuary. Mr Conniss is critical of the fact that prior to his retirement there seems to have been no policy or procedure for detailing what reduction should be payable but I do not see that as a cause of injustice to him.

19 It is true that Mr Conniss had not been informed at the time he left the service of the Company, that 4% per annum reduction only applied if a member retired early from active service. However I do not accept that this is a failure on the part of the Trustees to inform him of his benefits under the Scheme. Mr Conniss had been informed at the time he left the service of the Company of his benefit options. He had also been given a quotation of the estimated pension payable at age 60. Mr Conniss did not query how his pension at age 60 was calculated and the Trustees were not under any duty voluntarily to provide this information.

20 Mr Conniss stated that he had based his decision to defer taking his pension on the quotations he received in 1998. The pension quoted to Mr Conniss in 1998 was stated to be an estimate of the pension he would be paid at age 60. That estimate assumed a rate of inflation for the period between the date he left service and his 65th birthday, 10 October 2006. The main reason for difference between the figures provided to him in 1998 and those he received in 2000 was that inflation had for the two intervening years been lower than had been assumed in that estimate. The rate of inflation at the time he received his quote of 14 December 1998 was 2.8%. (The rates of inflation have not exceeded 5% to date). Because of this Mr Conniss was quoted a lower amount than he had been quoted two years earlier. I cannot see that he would have been helped had fuller information been provided in the booklet or at the time the quotation was given to him.

21 Mr Conniss claims that some of the statements made in Mr MacIntyre's letters quoted in paragraphs 11 and 12 are incorrect and others are a matter of opinion. I do not entirely agree with this claim. I agree that Mr Conniss was not specifically told that early payment of deferred pensions are calculated differently. However, if he had queried the calculation of the 1998 figures he would have realised that it was not the same as the basis that would have been used to calculate early retirement from active service.

22 Whether or not Mr Conniss asked for a written quotation at the time he left (I note the statement from Cameron McKenna that he did not) he certainly received one but decided not to pursue that option at the time.

23 Mr Conniss has stated that he is not certain whether or not he was given misleading information in 1998. There is no evidence which leads me to believe that he is not receiving his correct entitlement.

24 For the reasons given above, I do not uphold Mr Conniss' complaint against the Trustees.”

Therefore the wording in the rules clearly allowed the trustees to apply a retirement factor of their choice. This was crucial to the decision, and differentiates it from the decision in M00744.