Employers’ duty to advise pension scheme members

The Court of Appeal has dismissed an appeal by the widow of a pension scheme member who claimed that her late husband’s employer was under a duty to advise her husband in respect of his scheme membership. The Court upheld the County Court ruling that there was no general duty on an employer (or a trustee) to provide information and/or advice to an employee about their pension benefits in order to prevent future economic loss.

The facts of this case centre on the late Mr Outram who was a member of the Academy Plastics pension scheme. The employer acted as both trustee and administrator. When Mr Outram left the company in 1994 after 20 years’ service, he became a deferred member of the scheme. However, he was re-employed by the company in April 1995 and continued to work before resigning on grounds of ill-health in December 1995. He died the following February.

On rejoining Academy Plastics, Mr Outram had been eligible to rejoin the pension scheme but chose not to apply for membership. Had he rejoined he would have been eligible for an immediate pension in December 1995 since he was resigning on account of incapacity, and a cash sum would have been payable for his dependants on his death. Instead, only a refund of member contributions was payable.

Mr Outram’s widow alleged that the company had breached its fiduciary duty to advise Mr Outram that he should have rejoined the scheme in April 1995 and claimed damages for the economic loss suffered as a result of her late husband’s decision. However, her claim was rejected by the Court of Appeal which held that no such duty existed.

Should you wish to discuss any points arising from this judgment, please call either Mark Grant or Mark Atkinson on 020 7367 3000 or speak to your usual contact in the pensions department.