Scottish Teachers Superannuation Scheme Scottish Teachers Pension · CAS-38375-F4Q9

CAS-34195-B9P7

Ombudsman’s Determination Applicant Mr N

Schemes Scottish Teachers' Superannuation Scheme (the Scheme)

Scottish Teachers’ Pension Scheme (the new Scheme)

Respondent Scottish Public Pensions Agency (SPPA)

Outcome

Complaint summary

Background information, including submissions from the parties In March 2011, a Government-commissioned report recommended replacing existing public service pension schemes in Scotland with a new type of scheme. Following this, SPPA introduced the new Scheme which would be a career average revalued earnings scheme (CARE scheme), rather than being based on a member’s final salary.

After negotiations, the changes recommended in the report were accepted and formalised in the Public Service Pensions Act 2013. The new Scheme was due to be introduced for future service from 2015 onwards.

1 CAS-34195-B9P7 On 5 February 2014, Mr N joined Fife Council (the Employer) and became a member of the Scheme.

SPPA, the Scheme Administrator, has said it did not send Mr N a starter letter because the Employer did not send it the relevant new starter form containing Mr N’s employment details.

In 2015, Mr N contacted SPPA for information about his pension. Mr N says that SPPA told him that it did not provide quotations in the first two years of membership of the Scheme. SPPA has no record of this telephone conversation.

On 8 March 2017, Mr N contacted SPPA because he had not received any information about his pension. SPPA directed Mr N to its online member services.

On 29 March 2017, SPPA sent Mr N his service record and pensionable earnings, based on information provided annually by the Employer.

On 18 April 2017, Mr N contacted SPPA to dispute the information in his service record, which he stated incorrectly showed that he had been employed part-time. Mr N agreed to provide SPPA with the correct information. Mr N then requested a refund of his contributions, or to be allowed to transfer out his pension benefits, but SPPA advised him that it was not possible because he had accrued more than two years’ pensionable service.

Throughout April 2017, Mr N and SPPA corresponded about Mr N’s incorrect service details, how a CARE scheme worked and Mr N’s dissatisfaction with the administrative service provided by SPPA.

SPPA provided Mr N with a full breakdown of its service record for him. Mr N maintained that the record contained errors, so SPPA referred him to the Employer, explaining that it was reliant on the Employer to provide it with details of his pensionable service.

Mr N complained that the new Scheme information on the SPPA website was not helpful. SPPA discussed how a CARE scheme worked further with Mr N and agreed to contact the Employer about the ongoing, incorrect service enquiry. Mr N also agreed to contact the Employer about the issue.

2 CAS-34195-B9P7 In September 2017, Mr N requested an updated benefit statement. SPPA explained that it would send one once the service enquiry with the Employer had been fully investigated and resolved.

On 21 September 2017, SPPA contacted Mr N to confirm that it had received updated information from the Employer and that it had updated his service record in line with this. SPPA also confirmed that the new benefit statement would be uploaded to the online member services within six weeks. Mr N subsequently requested a copy of his employment history, which SPPA provided.

On 26 September 2018, SPPA issued a revised service breakdown to Mr N.

On 16 December 2018, Mr N complained to SPPA that:-

• Since 2017, he had made a significant effort to get his service record corrected but it remained incorrect.

• He did not receive any welcome documentation when he joined the Scheme in 2014.

• He contacted SPPA in 2015 and was advised that he would receive correspondence once he had been a member of the Scheme for two years.

• In 2015, his final salary pension moved to a CARE scheme, but he was not aware that it had moved; did not consent to it being moved; and was not given the opportunity to make an informed decision about joining the new Scheme.

• He was not eligible for a refund of the contributions that he had made because he had more than two years’ pensionable service.

• In 2017, his service record was corrected and he was told that he would receive an email when the statement was updated, but this did not happen and the statements are still incorrect.

• SPPA had breached his trust and had not followed the appropriate guidelines for providing him with information.

On 9 January 2019, SPPA issued its final response and said:-

• The Employer should have provided him with information about the Scheme when he joined in 2014.

• SPPA should have sent him a starter letter and an annual statement of his benefits when he joined the Scheme, so it apologised for not providing these.

• It also apologised that Mr N was incorrectly informed that he would not receive correspondence until he had more than two years’ pensionable service, because he should have received correspondence when he joined the Scheme.

3 CAS-34195-B9P7 • Mr N’s pension statements were incorrect because the Employer had provided SPPA with inaccurate information. SPPA had liaised with the Employer for some months about the incorrect service record and it trusted that the information in the final response letter was correct. Mr N should contact the Employer if the service record remained incorrect.

• It had arranged to upload an updated 2018 statement to Mr N’s online account.

• The new Scheme was introduced by the Government because final salary schemes were no longer deemed affordable. Members who were more than 13 years and six months from their normal retirement age, as at 1 April 2012, were moved to the new Scheme from 1 April 2015.

• The Employer was responsible for providing him with information about the new Scheme prior to its implementation. Further information could be found on the SPPA website.

• Mr N had more than two years’ pensionable service, so he was not eligible for a refund of the contributions. The contributions would provide Mr N with pension benefits payable from state pension age.

• If Mr N remained dissatisfied, he could ask SPPA to review his complaint under stage two of its Complaint Handling Procedure (CHP).

On 29 January 2019, Mr N requested that SPPA review his complaint under stage two of its CHP. Mr N said that:-

• He would have made different decisions had he been given the correct information when he joined the Scheme, because the Scheme was not suitable for his needs and circumstances.

• It was unacceptable that he had to contact SPPA about his incorrect service records which should have been accurate and, in his view, were not his responsibility to correct.

• He could not understand how a CARE scheme worked and, had he been provided with information about it, he would have opted out.

• The errors that he raised had not been rectified in his statements.

• To resolve his complaint, he wanted SPPA to:-

o Refund the contributions that he had paid since 2014; or

o Allow him to transfer his pension to another provider; and

o Provide an accurate statement showing how much had been paid into his fund and how much his lump sum would be when he retired.

4 CAS-34195-B9P7 On 20 February 2019, SPPA issued its stage two response under its CHP. It apologised that Mr N had not received the standard of service that he expected from SPPA and for any inconvenience or distress that it had caused. SPPA explained that it was reliant on employers to provide the correct information and had been reassured that the service and remuneration information it had received and put on its records was correct. In response to Mr N, SPPA said:-

New Starter information

• When Mr N joined the Scheme, both SPPA and the Employer should have provided him with information about the Scheme.

• It had included an undated copy of a starter letter for Mr N’s information. The sample starter letter explained that Mr N had options, some of which were subject to time constraints, and directed Mr N to the SPPA website.

• Process improvements had been put in place to ensure that all new members were issued with new starter information.

• If Mr N felt that he had been disadvantaged as a result of not receiving new starter information, he could submit an appeal under SPPA’s Internal Dispute Resolution Procedure (IDRP).

Service record

• It agreed that SPPA had produced incorrect statements as a result of incorrect information supplied by the Employer. But, it had been in contact with the Employer to ensure that the service and remuneration information was corrected.

• It had included a detailed breakdown of Mr N’s employment history.

• It had made improvements to its processes so that updated statements were received within reasonable timescales.

• It did not provide a breakdown of service for the academic year, which is August to August, because the information provided by the Employer was based on the financial year, which is April to March.

Pension Scheme Reforms and the move to a CARE scheme

• The Employer should have provided Mr N with information about the new Scheme prior to its implementation.

• SPPA’s website provided information about how a CARE scheme worked.

• When Mr N retired, he would have the option to commute part of his annual pension to receive a one-off, tax-free lump sum. It was not possible to claim all of the accrued pension as a one-off lump sum without an annual pension.

5 CAS-34195-B9P7 Mr N’s request for a refund of contributions

• The Scheme regulations deemed Mr N ineligible for a refund of his contributions because he had accrued more than two calendar years’ service.

• Mr N could dispute the application of the regulations under SPPA’s IDRP.

Mr N’s request to transfer out or stop contributions

• Mr N could stop his contributions at any time, but if he opted out of the Scheme, he would lose his final salary linking. This meant that his pension would be preserved using his final pay and service at the time of leaving the Scheme, rather than at his retirement date.

• The Pensions Schemes Bill 2015 only permitted the transfer of benefits into another occupational pension scheme.

Annual Benefit Statement

• When Mr N joined the Scheme, SPPA only produced annual statements once a member had accrued two calendar years’ service.

• Annual statements were calculated and produced automatically.

• SPPA did not produce or amend annual statements for a previous year as the most recent statement supersedes any previous statements.

• Mr N’s most recent statement showed the correct pension amounts based on amended information that the Employer had provided.

• Mr N’s pension age was incorrect for the final salary part of his pension. SPPA had arranged for this to be amended and Mr N would receive a notification confirming when this had happened.

• Annual statements were based on the financial year and the dates could not be tailored to the academic year.

On 28 February 2019, Mr N invoked the Scheme’s IDRP and said that:-

• If he was provided with information about the Scheme when he joined, he would have opted out in 2014.

• He believed he should be compensated by being put back into the position he would have been in, had he not been a member since 2014.

• He believed that his annual statements remained incorrect.

• He held benefits within an Australian Superannuation Fund, where the contributions were paid into a personal account which was available for him when he retired. He believed that all superannuation funds worked in the same way.

6 CAS-34195-B9P7 • He misunderstood how the Scheme worked because SPPA failed to provide him with information about it.

• He would like a refund of contributions or the option to transfer out to a more suitable pension plan.

On 17 June 2019, SPPA sent a service summary to Mr N following discussions with the Employer. The letter confirmed that Mr N would receive an IDRP response in due course.

On 26 June 2019, SPPA issued its IDRP response and said that:-

• The applicable regulations were The Teachers’ Pension Scheme (Scotland) (No.2) Regulations 2014 (the TPSS Regulations 2014) and the Pension Scheme Act 1993 (the 1993 Act).

• The Director of Policy, on behalf of the Scottish Ministers, had to consider whether the TPSS Regulations 2014 had been applied correctly, whether these allowed for any discretion and what information Mr N was provided with when he joined the Scheme in 2014.

• The Director of Policy had no power to override the TPSS Regulations 2014 or to permit any departure from their terms, as approved by Parliament.

• Regulation 79 of the TPSS Regulations 2014 stated that a member qualifies for retirement benefits when they accrue at least two years’ qualifying service.

• Regulation 183 of the TPSS Regulations 2014 states:-

• If a member has qualified for benefits, they are not entitled to a refund of contributions.

• Mr N had more than two years’ qualifying service, so the regulations did not allow for a refund of contributions.

• It was a requirement of Section 95 (2A) of the 1993 Act that transfers out of the Scheme were made to a registered occupational pension scheme with defined benefits, not to a defined contribution scheme offering flexible benefits.

• Mr N could transfer out to an eligible occupational pension scheme.

7 CAS-34195-B9P7 • It was a requirement for public service schemes to reform under the Public Service Pensions Act 2013.

• CARE schemes were introduced from 1 April 2015 and applied to all public service pension schemes.

• The Director of Policy apologised that Mr N did not receive a starter letter when he joined the Scheme in 2014.

• The Employer confirmed Mr N’s role on 30 June 2015 and his letter of appointment explained:-

o The Scheme had closed, and the new Scheme came into effect from 1 April 2015.

o Details of the new Scheme were available on the SPPA website.

• Mr N accepted his appointment on 1 July 2015 and did not make any enquiries about his pension following this letter.

• Mr N was signposted to the SPPA website within sufficient time to allow him to opt out of the Scheme.

Mr N remained dissatisfied with SPPA’s response because:-

• SPPA referred him to its website which did not provide clear information and contained many subpages.

• SPPA did not provide him with the information that it should have when he joined the Scheme in 2014.

• He was provided with incorrect information in his telephone conversation with SPPA in 2015, and his reliance on this information meant that he was now ineligible for a refund of contributions.

• The IDRP response did not acknowledge his first conversation with SPPA in 2015, when he was told that he would not receive any correspondence for the first two years’ pensionable service.

Adjudicator’s Opinion

8 CAS-34195-B9P7

Mr N did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr N provided his further comments which do not change the outcome. Mr N said that:-

• He was unable to find the information that he needed on the SPPA website, so he telephoned SPPA but was told he could not receive information for two years.

• Based on the telephone conversation in 2015, it was reasonable for him to wait two years to receive documentation about the Scheme.

• It was unreasonable to disregard the telephone conversation, because what he was told during this call was the fundamental reason that he waited for two years to chase information, which has now caused him to be ineligible for a refund of contributions.

• He was unaware of the two years’ pensionable service rule and could not locate this section on the SPPA website or in his employment contract.

9 CAS-34195-B9P7 • He did not know how to opt out, or if he even wanted to opt out in 2014, because he did not receive the starter letter. The information provided in the starter letter would have allowed him to identify that the Scheme was not suitable for him.

• He should receive a higher award to recognise the time he spent trying to rectify the errors and that he was misled into joining the Scheme.

• As of late July 2020, he will no longer reside in the United Kingdom, so his pension benefits will be “inaccessible”.

Ombudsman’s decision

I find that Mr N suffered significant distress and inconvenience as a result of SPPA not providing him with the new starter information on two separate occasions. I do not agree that Mr N’s complaint warrants a higher award for the following reasons:-

• Mr N says that he spent time ensuring that his service record was corrected. SPPA held incorrect service records based on inaccurate records provided by the Employer. Mr N informed SPPA that the records were incorrect and SPPA sought

10 CAS-34195-B9P7 to correct them by liaising directly with the Employer. SPPA cannot be held accountable for the incorrect information provided by the Employer.

• Mr N is not entitled to a refund of contributions because it is not permitted by the Regulations that govern the Scheme and the new Scheme. I appreciate that Mr N has said he will no longer reside in the UK as of July 2020 but he has not suffered a financial loss. Instead, his benefits will remain preserved until he is eligible to draw his retirement benefits or opts to transfer his benefits to an approved arrangement in his new country of residence.

I partly uphold Mr N’s complaint.

Directions

Anthony Arter

Pensions Ombudsman

18 August 2020

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