Pensions Ombudsman Determination: Member’s complaint of scheme Maladministration dismissed
10 / 10 / 2019
This judgment concerns the complaint of Mr “S” about the management of the Pennines Retirement Benefits Scheme (the “Scheme”) by Dalriada Trustees Limited (“Dalriada”).
The Scheme was established in August 2011 as an occupational pension scheme by Clarendon Hill Investments Ltd.. On 28 March 2012, the Pensions Regulator appointed Dalriada as the Scheme’s independent trustee because it considered that the Scheme was a pension liberation scam.
Dalriada commenced legal action against the former trustees of the Scheme, and in April 2012 obtained a freezing injunction over the assets of the former trustees and the companies involved. In March 2013 Dalriada agreed to take part in mediation to negotiate a settlement with the former trustees. Due to various complications, a settlement agreement was not finalised until May 2017. Dalriada made a series of announcements between 2012 and 2018, informing members of recent Scheme developments.
On 20 November 2017, Mr S asked Dalriada to consider his complaint under the Scheme’s internal dispute resolution procedure (IDRP).
Mr S’s complaint against Dalriada was made on the grounds that:
• Dalriada’s investigations were taking too long;
• legal fees exceeding £1m had been deducted from the Scheme;
• he had not being given correct or up to date information; and
• decisions had been made by Dalriada without Members’ consent.
On 6 April 2018, Dalriada sent Mr S a letter, referring to its announcements and explaining its position. Dalriada said that it could not yet place a value on the Scheme assets and would update members again after meeting with KPMG. Dalriada also explained that it had taken reasonable steps to communicate with members, and that trustees did not require members’ consent to make decisions regarding the Scheme. Dalriada denied that it had given Mr S any false information, and explained that it could not give him the details of the discussions about the settlement agreement as they were “without prejudice”.
As the IDRP had not been completed, Mr S’s complaint was considered by an adjudicator in July 2018.
The Pensions Ombudsman agreed with the Adjudicator’s Opinion that Mr S’s complaint should not be upheld.
In response to Mr S’s complaint of maladministration, the Ombudsman concluded:
• Dalriada did not drag out its investigations process more than was necessary, as it had to go through various legal processes;
• it was necessary for Dalriada to appoint solicitors to advise it on legal issues, and to conduct the litigation and settlement processes on its behalf. It is standard practice for professional fees incurred by trustees to be reimbursed out of the relevant scheme funds;
• KPMG was appointed as company liquidator in December 2017 to trace the Scheme assets. Dalriada could have informed Scheme members of the appointment of KPMG several months earlier than it did in April 2018. However, this delay was insignificant. Mr S has not provided satisfactory documentary evidence that Dalriada gave him false information; and
• Dalriada did not need to obtain members’ consent to appoint solicitors.
Administration of pension schemes: key considerations for trustees
Disclosure of information to members
Trustees are obliged by section 41 of the Pensions Act 1995 and the Disclosure Regulations 2013 to disclose certain information to members. Trustees also have a fiduciary duty to keep beneficiaries informed of scheme developments, and a failure to meet this duty can result in a finding of non-financial injustice by the Pensions Ombudsman.
In response to Mr S’s complaint, the Adjudicator did not consider that Dalriada’s level of communication justified the Pensions Ombudsman making an award to Mr S for non-financial injustice. Dalriada had issued a series of announcements to inform Scheme members of developments, and also operated a website, email and telephone enquiry lines for members.
However, the circumstances of the Scheme were taken into account by both the Adjudicator and the Ombudsman. The Ombudsman sympathised with Dalriada’s reasoning that it had informed members of material changes alone, due to the costs associated with issuing announcements. The Adjudicator noted that any award the Pensions Ombudsman could make against Dalriada for non-financial injustice would be payable against the Scheme, and further deplete the Scheme assets.
In order to comply with their legal and fiduciary duties, it is therefore advisable that trustees keep members informed of significant scheme developments. Trustees should also keep a record of their decision-making and have procedures in place for effective scheme management.
Internal Dispute Resolution
Trustees should ensure that they have a well-established procedure for dealing with complaints. Although most occupational pension schemes are subject to a statutory requirement to establish an internal dispute resolution procedure, the onus is on the trustees of the pension scheme to comply with the requirement, and not the employer. Any complaints made in accordance with the internal dispute resolution procedure should be dealt with within a period of four months. If you’d like assistance with your IDPR review, please let us know.