It is often said that the house and then the car are the biggest investments that the ordinary person make. For those with a good pension scheme the value of the pension may well be more than both combined. Solicitors should therefore be aware of how to protect an asset so valuable to the client.
Pensions law may be complex, full of traps and ever-changing but that does not mean that access to justice should be denied to the aggrieved person. There are special dispute resolution procedures and a special ombudsmen jurisdiction to deal with pension disputes which can be pursued (at least theoretically) by the client or his agent, or by a specialist solicitor or advocate to whom the job is “sub-contracted”.
There are several inhabitants of ombudsworld. This article is principally about the Pensions Ombudsman who is established and whose jurisdiction is set out by statute. There are other ombudspeople, with different although related jurisdictions whom it is useful to notice before passing on to the Pensions Ombudsman himself.
The Investment Ombudsman.
The Investment Ombudsman (or PIA Ombudsman) is set up under the auspices of the Personal Investment Authority (PIA) (a self regulating organisation under the Financial Services Authority [formerly Securities and Investment Board] in terms of the Financial Services Act 1986) with terms of reference issued by the Council of the Personal Investment Authority Ombudsman Bureau Ltd. Jurisdiction is as follows:(a) The ombudsman shall receive complaints made in accordance with or arising out of carrying on of investment business in the United Kingdom (within the meaning of the Financial Services Act 1986 on or after 29 April 1988 or any other business which is regulated by the Personal Investment Authority.
(b) The ombudsman shall also receive complaints not falling within paragraph (a) above made in connection with or arising out of investments (within the meaning of the Act) or policies of insurance the effecting and carrying out of which constitute long term business (within the meaning of the Insurance Companies Act 1982).
In July 1999 it was announced that complaints about owner-directors’ schemes (whether or not insured) would not be dealt with by the PIS Ombudsman. The PIS Ombudsman does deal with disputes affecting personal pension schemes.
The ombudsman shall, subject to various provisions, investigate and consider complaints within his jurisdiction and facilitate their satisfaction, settlement or withdrawal by making recommendations or awards or by such other means as shall seem expedient.
The ombudsman may act as a counsellor, conciliator or adjudicator in relation to any such complaint as is mentioned above.
The jurisdiction therefore deals with the selling of pensions and life assurance arrangements.
Members of the PIA subject themselves to this jurisdiction but the public do not, and can equally take matters to the court. It is to be noted that it is a voluntary arrangement.
As to further details of how to pursue claims see the booklet, Taking a Complaint to the PIA Ombudsman, issued by the Ombudsman’s Bureau which also contains a specimen complaint form.
The Insurance Ombudsman.
Again, this is a voluntary arrangement set up by the insurance industry and can deal with disputes regarding general insurance, such as household, medical, holiday.
On 19 March 1999 the Financial Services Authority announced that a Chief Financial Services Ombudsman would be appointed. The new Financial Services Ombudsman would be appointed. The new Financial Services Ombudsman Scheme Board is to recruit a Chief Ombudsman to head up the new Disputes Resolutions Team for Financial Services Consumers.
The Chief Ombudsman will initially advise the Board on setting up the new scheme which will bring together the Banking Ombudsman, The Building Societies Ombudsman, The Investment Ombudsman, The Insurance Ombudsman, The PIA Ombudsman Bureau, The Personal Insurance Arbitration Service, The FSA Complaints Bureau and Arbitration Service and The FSA Investigator.
The Pensions Ombudsman.
The Pensions Ombudsman has a statutory jurisdiction which is explained further in this article.
Dispute resolution and advice
The Pensions Advisory Service (OPAS), 11 Belgrave Road, London SW1V 1RB, (telephone 0171 233 8080), exists to assist members and beneficiaries of pension schemed to resolve differences with the trustees or administrators. The trustees of occupational pension schemes are obliged under the Occupational Pension Schemes (Disclosure of Information) Regulations 1996 (No 1655) to advise members of this.
The Pensions Act 1995, section 50, requires (subject to a range of exceptions) the trustees or managers of an occupational pension scheme to secure the adoption of arrangements for internal dispute resolutions.
Those arrangements must:(a)provide for the person on the application of certain complainers to give a decision on such a disagreement, and
(b) require the trustees or managers on the application of such complainer following a decision given in accordance with (a) above to reconsider the matter in question and confirm the decision or, give a new decision in its place.
The details of how this all works are found in the Occupational Pensions Scheme (Internal Dispute Resolution Procedures) Regulations 1996 (No. 1270).
The Pensions Ombudsman – general
The office of the Pensions Ombudsman and his jurisdiction and functions are statutory, being set out in the Pensions Schemes Act 1993, Part X, and regulations under it. He is based at 11 Belgrave Road, London, SW1V 1RB (Telephone: 0171 834 9144). He can investigate and adjudicate upon disputes of fact and law and complaints of maladministration made by a qualified complainer against certain people involved in the management of occupational or personal pension schemes. A useful overview can be obtained from the booklet The Pensions Ombudsman – what he can do, available from his office. The present (second) incumbent is Dr. Julian Farrand.
The Pensions Ombudsman – jurisdiction
His jurisdiction is set out in section 146 (as amended) and the Personal and Occupational Pensions Schemes (Pensions Ombudsman) Regulation 1996 (No. 2475) (as amended).
A matter may be referred by an “actual or potential beneficiary being:
(a)a member of the scheme (which includes any person who is or has been entitled to benefit under the scheme),
(b) the widow or widower, or any surviving dependant, of a deceased member.
Any such authorised beneficiary may make a complaint of maladministration against or refer a dispute of fact or law with any person responsible for the management of the scheme or an administrator of the scheme.
A person or body involved in the day to day management is a manager.1
In one case before him (Minsworth Pension Scheme) the Pensions Ombudsman extended the meaning of “administrator” to include an actuary. He seems content to extend it to other pensions professionals, e.g. investment managers. It is also understood that the Pensions Ombudsman in one case has imposed personal liability on an individual pensions manager.
Section 147 deals with the case of death, insolvency or disability of an authorised complainer.
A matter in relation to an occupational scheme may also be referred by employers, trustees or managers as follows:
- trustees or managers may make a complaint of maladministration against any trustee or manager of a different scheme;
- any trustee or manager can refer a dispute of fact or law with the trustee or manager of a different scheme;
- trustees or managers of a scheme may make a complaint of maladministration against (but may not refer a dispute of fact or law with) an employer in relation to the same scheme;
- an employer may make a complaint of maladministration against the trustees or managers in relation to the same scheme;
- an employer may refer a dispute of fact or law with the trustees or managers in relation to the same scheme.
Certain disputes are excluded. These include disputes which should properly be dealt with under the Financial Services Act and failure to comply with certain provisions of the Pensions Act 1995 (member nominated trustees; payment of surplus to the employer; employer related investments; requirement to appoint professional advisers; requirements to keep books and records; minimum funding requirement and requirements regarding schedule of contributions or payments).
Maladministration has never been fully defined. It seems to come with the idea of an Ombudsman having perhaps originated in relation to the parliamentary and local authority Ombudsmen. The description, if not a definition, of maladministration given by the Right Honourable Richard Crossman in discussing the legislation (Hansard 734 H.C. Deb., col 51) (the “Crossman catalogue”) has been cited with judicial approval by Lord Denning MR thus:
“It will cover ‘bias, neglect, inattention, delay, incompetence, ineptitude, perversity, turpitude, and so on’. It ‘would be a long and interesting list’, clearly open ended covering the manner in which a decision is reached or discretion is exercised; but excluding the merits of the decision itself or of the discretion itself.” It follows that a “discretionary decision, properly exercised, which the complainant dislikes but cannot fault the manner in which it was taken, is excluded”.2
The Pensions Ombudsman is excluded if before the making of the complaint or the reference of the dispute, proceedings had begun in any court in respect of matters which could be the subject of the investigation. On the other hand where a matter is already before the Pensions Ombudsman and subsequently gets into court, then under section 148 the court is given power to sist the action.
The subject matter in the reference to the Pensions Ombudsman must have arisen within the previous three years.
The Pensions Ombudsman – procedure
The Pensions Ombudsman procedure is set out in sections 149 and 150 and the Personal and Occupational Pensions Schemes (Pensions Ombudsman) Procedure Rules 1995 (No. 1053) as amended.
The Pensions Ombudsman will not deal with a dispute unless it has been through the Internal Dispute Resolution procedures (subject to limited exceptions in regulation 3). He also expects complainers to try to resolve the matter through OPAS.
Apparently, most complainers are not represented. A solicitor or other representative should provide evidence of his authority. The Ombudsman has available a form for making reference to him for investigation. Its use is not essential but the information required should still be given in whatever form the reference takes. References from employers, trustees and managers do not have a set form. It is helpful to indicate whether it is a complaint of maladministration, or dispute of fact and law but the Pensions Ombudsman tries to avoid rigid adherence to formalities which may get in the way of justice.
There are arrangements for fast tracking out matters without merit and for grouping complaints relating to the same matter.
The reference is intimated to the respondent and the Pensions Ombudsman sends instructions and guidance for respondents on how to respond. (This also gives information on things like productions, numbers of copies to be submitted, joint responses etc.) They are expected to respond within twenty one days of receipt of intimation of the reference. There is no set method of response but the guidance gives helpful indication of matters that should be covered.
While the Ombudsman does have power to hold hearings, this is rarely done and most references are dealt with by way of intimation and response until the Pension Ombudsman draws that to a conclusion. This may change as a result of the Human Rights Act 1998, giving effect to the European Convention on Human Rights.
The proceedings are consequently much less formal than court proceedings, being mainly conducted by correspondence although he is, of course, bound by the rules of natural justice. The Pensions Ombudsman does however have effectively the powers of the Court (although evidence is not more compellable than in a court). He can refer questions of law to the Court.
Ultimately he must issue a determination to the parties involved. In the Seifert3 case the Pensions Ombudsman was criticised by the English High Court for going down a line, devising a solution of his own. He therefore issues notification of preliminary conclusions (formerly referred to as a provisional determination) and gives the opportunity for further comment and responses on this. This is a confidential intimation.
His final determinations are enforceable in like manner as an extract registered decree arbitral bearing warrant for execution issued by the Sheriff Court.
His determination may direct any person responsible for the management of the scheme to which the complaint or reference relates to take or refrain from taking such steps as he may specify in his determination. He has power to award interest on late payments (section 151A) but his power to award expenses is limited to travel and subsistence expenses and compensation for lost earnings. He may make a compensatory award. The Ombudsman has taken power to give compensation awards in the range of £50 to £500 for distress and inconvenience. He has on occasion also required pensions professionals to pay back fees. He must however take regard of any indemnities of limitations or restrictions of liability contained within the trust provisions.4
The Ombudsman’s final determination on complaints of maladministration or disputes of fact5 and law is final subject only to appeal on point of law to the Court of Session.
It appears6 that appeal is under Chapter 41, Part III, of the Rules of the Court of Session 1994 set out in schedule 2 to the Act of Sederunt (Rules of the Court of Session 1994) 1994 (S.I. 1994 No.1443). It appears that no appeal in Scotland has yet reached a conclusion. What is apparent is that even if no party enters answers to an appeal it will still go to a hearing before the Inner House.
The Pensions Ombudsman has had a considerable number of appeals lodged in England against his Determinations and it appears that he was constrained, by reason of public expense, from lodging answers in more cases than he did. However, in one case University of Nottingham v Eyett (1999) 1 W.L.R. 594 it was held that as it was desirable to have argument before the court, a successful appellant would be awarded expenses only in so far as they were increased by the Pensions Ombudsman’s appearance.
Pension rights are valuable. Pension schemes are complicated by law which is far from simple. It is hardly surprising that disputes arise.
The office of the Pensions Ombudsman provides a cheaper, although not necessarily always quick, means of determining disputes. The Pensions Ombudsman produces an annual report which now contains summaries of selected cases. It is clear that these are by no means confined to disputes over matters of a few thousand pounds. In The National Gird Co Plc v Laws (1999) P.L.R. 37 (which is now moving to the House of Lords) questions in issue extended to £250,000,000 worth of surplus. It is also clear that the Pensions Ombudsman is not slow to come to determinations of maladministration nor to make awards in favour of complainers. Many cases also have involved review of trustee decisions or rather decision making processes which have come unstuck through not considering the relevant factors or not considering them in the correct way, e.g. where authority has not been properly delegated.
Iain J S Talman
*Since the writing of this article, the English Court of Appeal has given a decision in the Edge case which has concerned the Ombudsman as it limits his scope to rule on cases involving scheme wide disputes. It is understood that the Ombudsman is in discussion with the DSS regarding extension of his jurisdiction.
- Century Life Plc v The Pensions Ombudsman (1995) P.L.R. 135.
- R v Commissioner for Local Administration ex p Bradford Metropolitan City Council (1979) QB 287. See also R v Commissioner for Local Authority Administration ex p Croydon London Borough Council (1989) 1 All ER 1033.
- Seifert, The Pensions Ombudsman (1996) P.L.R. 479.
- Seifert, supra; Armitage v Nurse (1997) P.L.R. 51.
- See e.g., Edge v The Pensions Ombudsman (1998) 3 W.L.R. 466.
- The note to Rule 41.4 indicating that appeals from the Pensions Ombudsman are by stated case is almost certainly wrong.