Clive Weber
- Consultant
- Pensions & Employee Benefits
Pensions Ombudsman upholds Executor’s claim to past pension payments
The member’s executor battled through the scheme’s IDRP and an adverse decision by the PO’s Adjudicator, finally to win before the Pensions Ombudsman (TPO), some 6 years after the member’s death. TPO decided that, on its wording, the scheme’s forfeiture rule was inapplicable, highlighting the care needed in interpreting scheme forfeiture provisions.
In the determination dated 8 May 2026 relating to the European Metal Recycling Limited Pension and Life Assurance Scheme (CAS -85140-P4M5) TPO considered different types of forfeiture clauses and reviewed case law such as Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc[1] (“Lloyds”), Punter Southall Governance Services Limited Group Pension Trust Ltd v Jonathan Hazlett[2] (“Axminster”), and CMG Pension Trustees Ltd v CGI IT UK Ltd[3] (CMG).
Facts
The complaint was brought by Mr G, the executor of Mrs P’s estate, and concerned Mrs P’s spouse’s pension payable by the European Metal Recycling Limited Pension and Life Assurance Scheme (the “Scheme”).
Mrs P started receiving a pension from the Scheme following her husband’s death in 1996, but the payments stopped when she moved to Turkey in 2001. Mrs P continued to receive her other pension arrangements during that period.
In 2014, the newly appointed scheme administrator unsuccessfully attempted to trace Mrs P via the Department for Work and Pensions (DWP). It later transpired that the administrator had used the wrong date of birth when making the request.
In 2020, Mrs P died in Turkey. Shortly afterwards, Mr G notified the scheme administrator of her death and enquired about her potential benefits under the Scheme.
In 2021, the scheme administrator notified Mr G that it did not know why the Scheme stopped paying Mrs P’s pension in 2001, but explained that, under the Scheme rules, the trustees had a discretion to forfeit benefits that had not been claimed within six years of their due date (or eight years for GMP payments). The trustees had decided to exercise that discretion but agreed to pay the outstanding pension payments for the last six years (and eight years for GMP).
Mr G accepted the award but submitted a complaint under the Scheme’s internal dispute resolution procedure which was rejected at both stages of the procedure.
Complaint to TPO
Mr G’s initial complaint to TPO was not upheld by the Adjudicator, following which Mr G brought a further complaint. The central question for TPO was whether the Scheme’s rules permitted the trustees to forfeit benefits which had not been claimed within the relevant period.
Mr G relied on two main arguments:
- that Mrs P had a statutory right to a transfer under section 95(2) of the Pensions Schemes Act 1993, which could not be removed by the Scheme Rules or discretionary forfeiture; and
- that there is no statutory time limit to recover trust property from trustees, and therefore the forfeiture clause could not apply.
TPO upheld the complaint, although not on the basis of the arguments advanced by Mr G. He rejected the transfer argument, noting that Mrs P had already started receiving her pension and therefore no longer had a statutory transfer right. He also held that, while there is generally no statutory time limit for the recovery of trust property, this does not prevent trustees from relying on a valid forfeiture provision in scheme rules
Instead, the decision turned on the validity of the scheme’s forfeiture clause.
The Ombudsman’s decision
The relevant provision read:
“Section 25: Lien on benefits and forfeiture
(b) Forfeiture
Any monies payable out of the Plan and not claimed within six years from the date on which they were due to be paid may at the Trustees’ discretion may be used for any of the purposes of the Plan.”
TPO confirmed that while section 92(1) of the Pensions Act 1995 provides that an entitlement to a pension under an occupational pension scheme cannot be forfeited, section 92(5) and section 26 of the Occupational Pension Schemes (Schemes that were Contracted-out) (No 2) Regulations 2015 permit forfeiture in certain circumstances, where scheme rules contain an effective forfeiture clause. Thus, TPO turned to consider the validity of Section 25.
Applying the High Court’s reasoning in Lloyds, CMG and Axminster, the Ombudsman distinguished between two categories of clauses:
- true forfeiture clauses, which extinguish or suspend a member’s entitlement; and
- administrative provisions, which simply permit trustees to apply unclaimed monies elsewhere.
In CMG, the rules provided that unclaimed benefits “shall be retained” by the trustees. This wording was held to be such that paying unclaimed benefits would arguably result in a breach of trust. Accordingly, the clause was found to fall into the first category.
By contrast, in Axminster, the clause merely allowed trustees to apply unclaimed monies for other scheme purposes and was therefore held not to be a valid forfeiture clause: “Any monies payable out of the Plan and not claimed within six years (…) may (at the trustees discretion) be applied in…”.
Given the similarity between Section 25 of the Scheme and the Axminster clause, TPO held that a similar reasoning should be followed.
Although section 25 was labelled “forfeiture”, the Ombudsman focused on whether its operative wording was sufficient to deprive members of their entitlement, and found that, like the clause in Axminster, it merely allowed trustees to apply unclaimed monies for other purposes. The clause was therefore not an effective forfeiture provision.
TPO also considered the distinction between “missing beneficiaries” and “underpayment of benefits” cases. The crucial issue was that it was unclear why payments had stopped in the first place and that the Scheme was funded on the basis that Mrs P would be paid her pension until her death. As such, the case was better viewed as one of underpayment of benefits, rather than a missing beneficiary case. This distinction is important as the courts (and the Ombudsman) are less willing to interpret provisions as allowing forfeiture where arrears have arisen due to an error of the trustees.
Finally, TPO noted the typographical error in Section 25 of the Scheme (repetition of “may”) and found that the power was expressed in discretionary rather than mandatory terms. While this did not automatically prevent the validity of the clause, it reinforced the conclusion that the clause did not operate to extinguish entitlement.
Therefore, TPO upheld the Executor’s complaint and directed the trustees to pay the full arrears from 2001, together with interest.
Conclusion
The determination is not a departure from existing law, but it is a clear reminder of how strictly forfeiture provisions are scrutinised. The starting point remains that pension entitlements should be honoured unless the rules clearly and effectively provide otherwise.
For trustees, it is important to remember: if forfeiture is intended, the rules must say so in unequivocal and operative terms.
Key Takeaways
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Headings are illustrative only. The operative wording must clearly extinguish or suspend entitlement for the clause to be a valid forfeiture clause.
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Simply because a beneficiary has gone missing does not mean that it will be a “missing beneficiary” case. Where arrears arise in circumstances suggesting administrative failure or trustee error, it may be more difficult to rely on forfeiture.
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Drafting precision is critical. Small differences in wording – particularly the use of discretionary (“may”) versus mandatory (“shall”) language – can determine whether a clause is effective.
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The case demonstrates the high level of persistence expected of Executors in properly tracking down members’ pension entitlements.
[1] [2018] EWHC 2839 (Ch).
[2] [2021] EWHC 1652 (Ch).
[3] [2022] EWHC 2130 (Ch).
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
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