Eyms Group Pension Plan · CAS-64504-Z5R7

CAS-64504-Z5R7

Ombudsman’s Determination Applicant Mr S

Scheme EYMS Group Pension Plan (the Plan)

Respondents MUFG Retirement Solutions (MUFG) Dalriada Trustees Limited (the Trustee)

Complaint Summary

• He missed the possibility of early retirement and suffered financial detriment due to the poor service provided by the Plan’s administrator and the Trustee.

Summary of the Ombudsman’s Determination and reasons The substantive complaint is partly upheld for the following reasons:-

• Mr S’ member record was deleted in error before MUFG became administrator of the Plan. Consequently, MUFG cannot be held responsible for that error resulting in an initial delay in identifying Mr S as a member of the Plan.

• In reinstating Mr S’ benefits and calculating a benefit statement and transfer value quotation in 2019, the Trustee and MUFG had correctly concluded that pre- retirement revaluation had already been recognised in the calculation of the transferred-in pension, and accordingly no further revaluation in deferment was due.

• The Trustee and MUFG were wrong to conclude that the transferred- in pension should not increase in payment from retirement. As a result, at retirement, a lower commutation factor than appropriate was used, resulting in an underpaid lump sum and a lower starting pension. Further, pension increases

1 CAS-64504-Z5R7 have not been paid on the transferred-in benefits from retirement, resulting in further underpaid pension.

• The value of Mr S’ benefits had he retired early would have been the same, on an actuarial basis, as the value of the benefits he is entitled to receive having retired at his normal retirement date (NRD). So, Mr S has not suffered any loss in respect of being unable to retire early.

• The Trustee’s award of £2,000 to Mr S was sufficient recognition of the severe distress and inconvenience he suffered as a result of the delay in identifying him as a member of the Plan and the failure to fully reinstate his pension in respect of the transfer.

Detailed Determination Material facts

The Plan is governed by the EYMS Group Pension Plan Definitive Deed and Rules dated 24 October 2002 (the Plan Rules), which provide that:-

“37(E) The Trustees will calculate any cash equivalent in a way certified by the Actuary as satisfying the statutory requirements. The amount of the cash equivalent is reduced in the circumstances set out in the relevant legislation.”

Mr S initially joined the EYMS Pension Fund (the Fund), a defined benefit (DB) arrangement, in April 1989 following the start of his employment with East Yorkshire Motor Services Limited (EYMS), the Principal Employer in relation to the Fund.

A guidance booklet called ‘EYMS Group Limited Pension Fund Explanatory Booklet’ dated May 1988 (the Explanatory Booklet) was made available to members of the Fund including Mr S and it set out details as shown in Appendix 1.

On 21 September 1989, a transfer in quotation (the 1989 Transfer Quotation) was issued by EYMS to Mr S in respect of a proposed transfer from Hodgson Impey Retirement Benefits Scheme (Hodgson) to the Fund. It quoted the amount of the transfer as £4,562 and provided that, if the transfer was received, Mr S would be entitled to “the following additional benefits”. These were listed as a pension from January 2023 of £6,539.60 a year, a widow’s pension on death before and after retirement of £3,269.80 and a lump sum on death before retirement.

Beneath those details was the following: “Note that the guaranteed minimum payment from the previous scheme, including revaluation to the State Pension Age are included. The balance of the benefit includes revaluation at 5% p.a. up to your Normal Retirement Date.”

The 1989 Transfer Quotation also included a statement that “All benefits will be paid in the same way as your normal scheme benefits”. For general information about the Fund, it directed Mr S to the Explanatory Booklet or to write to the trustees.

2 CAS-64504-Z5R7 On 9 November 1989, Mr S signed the 1989 Transfer Quotation and the transfer proceeded.

At the time of the transfer the Fund was governed by the deed establishing the EYMS Limited Pension Fund dated 3 April 1987 (the Interim Deed) pending adoption of a definitive trust deed and rules, with details of the benefits provided being notified to members according to recital (B) to the Interim Deed. The Interim Deed included a provision for accepting transfers in, subject to a number of provisos, as follows:-

“5. The Trustees shall have power with the consent of the Principal Employer to accept for inclusion in the Fund from any retirement benefits arrangement (hereinafter called “the Other Arrangement”) specifically approved for the purposes of this Clause by the Board of Inland Revenue any cash sum or other assets which the trustees thereof or any person or persons having the necessary powers thereunder (hereinafter called “the Transferor”) may be authorised to pay or transfer to them in respect of a Member and the Trustees shall confer on him such rights under the Plan as are determined by the Actuary to be equal in value to the assets so received…”

On 8 February 1990, Noble Lowndes, the Fund’s administrator at the time, wrote to Mr S (the 1990 Letter) confirming that the transfer had been completed, and that he would be entitled to additional pension from the Fund of £6,539.60 a year from the NRD at age 65 in January 2023.

In April 1991, Mr S left the Fund and became a deferred member.

On 1 June 1991, Noble Lowndes sent Mr S a preserved benefit statement (the 1991 Leaver Statement). It quoted a pension calculated at the date of leaving the Fund of £7,193.60 per year and an estimated pension of £10,145.72 a year at his NRD, including a GMP. A note in the 1991 Leaver Statement also stated that:-

• “The following benefits are all payable in accordance with the rules of the scheme which are summarised in the Explanatory Booklet”, a copy of which was provided with the statement;

• The quoted benefits included those purchased by the transfer value received from Hodgson;

• Once in payment the pension would increase on a regular basis.

On 13 August 1991, EYMS sent Mr S a pension benefit statement summarising his benefits as at 1 April 1991 (the August 1991 Statement). This appeared not to take account of the fact that he had left service late in April 1991. However, in the section headed “On Retirement”, it included that he would “in addition” receive a pension of £6,539.60. It then included a section headed “After Retirement” detailing the spouse pension, a 5 year guarantee and then under the heading “Additional Information” it included a statement that “Pensions paid by the scheme are increased each year during payment. See your explanatory booklet for details.”

3 CAS-64504-Z5R7 On 6 November 1991, EYMS sent Mr S a transfer out statement (the November 1991 Statement). It quoted benefits including a pension of £7,193.60 per year calculated at the date of leaving and an estimated total pension of £10,145.72 a year from his NRD of which the whole amount is stated as increasing at “3% p.a. in payment.”

The November 1991 Statement also confirmed that the quoted benefits included revaluation of the GMP up to the State Pension Age and that the excess of GMP had been revalued by 5% per year up to the retirement date. If the RPI increased by less than 5% per year over the period to retirement, the quoted benefits could reduce.

On 10 May 1996, Sedgwick Noble Lowndes, the Fund’s new administrator sent Mr S a change of address acknowledgement letter (the 1996 Letter).

In March 1997 the Trustees of the EYMS Group Pension Fund (the Trustee of the Fund) wrote to Mr S (the Merger Briefing) and confirmed in summary that:-

“Following a review of the pension arrangements it has been decided with the agreement of [EYMS, the Trustee of the Fund]…and [the Trustee] to merge [the Fund with the Plan] with effect from 6 April 1997. The merger will be [effected] by transferring all the assets and the benefit entitlements from [the Fund] to [the Plan] and discontinue the Fund.

On 6 April 1997 your [deferred] benefits will be transferred to [the Plan. The Trustee of the Fund wishes] to reassure you that the merger of the two pension schemes will not affect the amount or eventual payment of your pension and that it will be payable to you on the same terms as previously advised.”

In April 1997, the Fund merged with the Plan.

In 2001, Mercer became the administrator of the Plan. In 2008, PFP Benefit Solutions (PFP) took over as the administrator and in 2015, Ascot Lloyd (Ascot) acquired PFP, and was appointed the administrator of the Plan.

On 28 November 2018, Mr S telephoned Ascot asking for a benefit statement and was told that no record of his membership in the Plan had been found. Ascot said that Mr S should send copies of any documents he held confirming his membership so the matter could be investigated further.

On the same date Mr S emailed Ascot copies of the November 1991 Statement and the 1996 Letter.

On 29 November 2018, Ascot emailed Mr S and confirmed that no record of his membership had been found. Ascot said that it could provide no further assistance in identifying Mr S’ member record. He should contact Mercer, as it was one of the Plan’s previous administrators.

4 CAS-64504-Z5R7 On 7 February 2019, Ascot emailed Mr S and said that following further investigations, Mercer had identified his record but could provide no further information without a letter of authority from him. Ascot said Mr S should contact Mercer directly by using a telephone number provided.

On 10 February 2019, Mr S emailed Ascot and said he would like a contact name at Mercer since it had referred him to EYMS for assistance.

On 11 February 2019, Ascot emailed a contact name at Mercer to Mr S.

On 13 February 2019, Mr S emailed Ascot confirming that he had telephoned Mercer and was told that it had no record for him related to the Fund or the Plan.

On 14 February 2019, Ascot emailed Mr S and reiterated that it could not obtain any further information from Mercer without a letter of authority from him. Ascot said that Mr S should submit all evidence of his membership to Ascot, and the matter would then be referred to the Trustee for consideration.

On 14 March 2019, Mr S emailed Ascot asking for an update on his enquiries regarding his membership of the Plan.

On the following day Ascot emailed Mr S and said that no action had been taken as he had not responded to its email dated 14 February 2019.

On 17 March 2019, Mr S emailed Ascot and provided copies of documents including the 1991 Leaver Statement, the November 1991 Statement and the 1996 Letter.

On 16 April 2019, Ascot emailed Mr S and confirmed that the Trustee had contacted Mercer regarding his membership claim.

In June 2019, the Trustee received confirmation from Mercer that it no longer held any records for Mr S.

On 21 May 2019, the Trustee held a meeting during which Mr S’ membership claim was discussed. This established that HM Revenue & Customs (HMRC) held a GMP record for him in the Plan. On that basis the Trustee concluded that Mr S should be reinstated as a member of the Plan.

On 21 June 2019, the Trustee emailed Mr S confirming that Mercer held no record for him relating to the Fund or the Plan. But his benefits would be reinstated and a deferred benefit statement provided to him.

On 26 June 2019, Ascot emailed Mr S reiterating the Trustee’s decision.

On the same date Ascot posted Mr S a benefit statement (the 2019 Statement), quoting a yearly pension of £8,531.11 from his NRD. Regarding annual increases applied to the quoted benefits, the 2019 Statement also stated:-

“For each complete tax year between your date of leaving [the Fund] and payment, the GMP will increase by 7.5% per [year] compound.

5 CAS-64504-Z5R7 The pension in excess of your GMP will be increased between your date of leaving [the Fund] and payment in line with the increase in the Consumer Price Index (CPI) subject to a maximum of 5% per [year].

Your transferred in pension is a fixed pension payable from your NRD.”

The 2019 Statement also stated that the pension would increase in line with CPI up to a maximum of 3%, and “Your transferred in pension will not increase in payment”. It stated, amongst other things, that the quoted figures were not guaranteed, that in the event of a discrepancy with the Plan Rules the benefits would be limited to the entitlement under the Plan Rules and that Mr S was entitled to retire early subject to the Trustee’s consent, with an actuarial reduction applied.

On 16 August 2019, Ascot sent Mr S a CETV quotation of £166,147 (the 2019 Transfer Quotation).

On 9 September 2019, Mr S telephoned Ascot asking for clarification regarding the way in which the 2019 Transfer Quotation had been calculated and said it did not appear to compare favourably with his retirement benefits in other pension schemes. Mr S also said he would like copies of all general correspondence that had been shared with members of the Plan since 2007.

On 10 September 2019, Ascot emailed Mr S and said:-

• His benefits in the Plan consisted of two elements, including a pension of £654 per year at the date of his leaving the Fund, accrued while he was an active member. That figure had been revalued at a rate of £1,991.51 a year resulting in a CETV quotation of £55,066. The other element of his benefits originated from a transfer into the Fund, which provided a pension of £6,539.60 per year calculated at the date of his leaving, and was not subject to yearly revaluations.

• When calculating a CETV, the Plan’s Actuary (the Actuary) considered many factors, examples of which were GILT yields, mortality rates, interest rates and assumed investment growth.

• Generally, it was assumed that retirement benefits would be payable for a number of years from the NRD. The figures quoted in the 2019 Statement and the 2019 Transfer Quotation were calculated on the basis that he would not reach that point for another four years.

• While the NRD was at age 65, an element of his benefits was payable unreduced from age 60. So, a late retirement uplift was applicable to that element to cover the period between the NRD and the date he claimed retirement benefits.

On 11 September 2019, Ascot emailed Mr S and provided copies of four historic documents in response to his enquiry of 9 September 2019, including:-

• A notice to members confirming changes in the selection process for member nominated trustees. 6 CAS-64504-Z5R7 • A letter dated 11 September 2019 regarding the sale of EYMS.

• A Summary Funding Statement dated February 2013 (the 2013 Funding Statement) confirming a funding deficit of £39,123,000 and a solvency level of 43.6%.

On 26 September 2019, Mr S emailed Ascot and said:-

• He had compared the “fund value to pension” based on figures in the 2019 Statement and the 2019 Transfer Quotation with benefit statements relating to his other pension arrangements, including a stakeholder pension plan, a separate DB scheme and a defined contribution (DC) plan. There appeared to be wide variations in the ratio of fund value to annual pensions in these cases.

• According to his calculations, the transfer in should be valued at approximately £181,000, if a similar ratio of fund value to quoted pension as that used in calculating benefits from his DC plan was applied. In that case the total value of his benefits in the Plan should be around £372,367. Ascot should explain why the benefits it had quoted were poor when compared to his other pension arrangements.

• Ascot and Mercer had provided poor service which was shown by the misinformation he had received over the previous nine months, in addition to deleting his member record. So, he would like a review of the figures quoted in the 2019 Statement and an explanation of the assumptions that had been applied in calculating it.

• There ought to be more historic documents than the four that Ascot had provided on 11 September 2019. Especially as those documents covered a period of 23 years between 1996 to 2019. A former colleague at EYMS had informed him of an enhanced transfer value option that had been offered “some years ago”. He would like a copy of any correspondence relating to this offer.

On 8 November 2019, the Trustee emailed Mr S and said:-

• The Plan CETV quotations were based on the advice of the Actuary and needed to represent a “fair value”. In that regard the precise benefits payable under the Plan, the overall funding position of the Plan and existing investment market conditions had been considered. So, calculation of the CETV quotations was specific to the Plan, as approved by the Actuary and the Trustee.

• It was not possible to directly compare the benefits payable from one pension scheme to another because each scheme had its own benefits structure. So, it was impractical to try and comment on the information he had provided regarding his other pension arrangements. He had been comparing his DB entitlements in the Plan with DC benefits. DB arrangements provided benefits based partly on pensionable pay and the length of a member’s pensionable service.

7 CAS-64504-Z5R7 • In DC arrangements a member’s contributions built up a pension fund which was then used to provide an income at retirement. If that retirement income was secured by purchasing an annuity, a high ratio of fund value to pension provided lower benefits than would be the case in a DB arrangement. Annuity pricing also tended to include a profit margin for the annuity provider. This could be a costly option for DC scheme members hence the high ratio of fund value to pension provided.

• The email of 10 September 2019 had explained the differences between the benefits accrued in the Plan and those transferred in. Benefits accrued in the Plan were more expensive to provide due to more generous inflation increases. This was reflected in the differing fund value to quoted pension ratios between the benefits accrued while an active member of the Fund and the transferred in portion of his entitlements.

On 14 February 2021, Mr S complained under stage one of the Plan’s Internal Dispute Resolution Procedure (IDRP) and said:-

• It was not until 26 June 2019 that the 2019 Statement was sent to him following his enquiry on 28 November 2018. During the seven-month period between those dates, he was initially told that no record of any benefit entitlement for him had been found. Consequently, he was forced to spend months trying to trace the administrator responsible for holding his benefit details.

• The 2019 Transfer Quotation and 2019 Statement seemed low when the figures were compared with those from other pension schemes he had claimed benefits from. He could not understand the explanation Ascot provided in November 2019. The main point of his enquiry had been to gain an understanding of the return on investment to generate a retirement income from the Plan.

• The understated benefits from the Plan had caused a shortfall of between £161,000 and £206,000. He would like the Trustee and the Actuary to review the figures quoted in the 2019 Statement and the 2019 Transfer Quotation including an explanation regarding the reasons why the figures were so low.

• He would like copies of all correspondence related to the enhanced transfer option that was sent to employees of EYMS. Only standard pension circulars on the matter had previously been provided to him. It was unclear whether Ascot had kept full records of the correspondence he wanted.

• The delay in confirming his benefit details from the Plan had caused him to lose an opportunity to invest in property to achieve rental income after retiring. Ascot’s poor service had also delayed his overall retirement planning resulting in other lost investment opportunities, causing him distress, inconvenience and financial detriment.

On 26 March 2021, Ascot wrote to Mr S and said:-

8 CAS-64504-Z5R7 • The Plan’s administrator had changed several times “over the years”. This was not uncommon in the pensions industry. However, it was unusual for an administrator to delete a member record such as his for no apparent reason. Especially, as the Plan was subject to an annual audit.

• The documents he had provided as evidence of benefit entitlement initially from the Fund, and subsequently the Plan, were used by Ascot to perform a wide search that also involved a review of member data received from PFP. However, no trace of any benefit entitlement for him was found. Due to the historic nature of the documents provided, he was advised to contact Mercer on 29 November 2018, as it had been the Fund’s administrator for several years in the 1990s.

• His enquiries to Mercer in February 2019 established that it held no record for him relating to the Fund, after initially confirming that one had been found. However, additional historic documents he provided in March 2019 as evidence of benefit entitlement from the Plan were submitted to the Trustee for consideration. The Trustee’s subsequent investigation established that there was a GMP recorded with HMRC for him in the Plan. It was on this basis that the Trustee concluded that his benefit entitlement in the Plan should be reinstated.

• Ascot and the Trustee had acted diligently to establish his benefit entitlements from the Plan. However, it took seven months to reach that stage, because the investigation into the matter had involved “a lot of work”. The Trustee had a duty of care to act in the best interests of all members, and this required a thorough investigation, due to the potential impact on the Plan if benefits were paid incorrectly.

• His complaint of 26 September 2019 regarding the ratio of fund value to quoted pension in the 2019 Transfer Quotation prompted a review as requested. The letter in response dated 8 November 2019 was “carefully prepared and written in a non-technical format so that the content could be understood”. That letter also explained the need for the Trustee to seek advice from the Actuary regarding the basis for calculating a CETV quotation. Further clarification was provided on the difference between DB and DC pension schemes, which meant that it was not possible to directly compare benefits from the Plan with his DC arrangements in other schemes.

• Benefits like the enhanced transfer option were typically funded by an employer and not from the assets of its pension scheme. No historic communications to members regarding an enhanced pension transfer option had been found. However, evidence of a transfer out project in 2007 involving a previous administrator was found. Full details of that process were not known to Ascot or the Trustee.

• Neither Ascot nor the Trustee was at fault for any maladministration or financial detriment to him. He had not, in any case, provided any evidence to clarify the extent of any financial detriment. His benefits in the Plan had been reinstated in 9 CAS-64504-Z5R7 accordance with the Plan Rules and the retirement pension was not due for payment until his NRD in January 2023. So, there was no delay in paying his retirement benefits caused by the initial failure to identify him as a member.

On 8 May 2021, Mr S appealed under stage two of the IDRP and said:-

• The primary cause of his complaint was that Ascot and the Trustee had failed to maintain adequate records that would have facilitated the efficient and timely provision of a benefit statement. As a consequence of Ascot’s failures there was also a delay in providing the 2019 Transfer Quotation.

• Following his initial enquiry regarding a benefit statement Ascot said that no record was found, despite him having provided a copy of the November 1991 Statement. Ascot gave no indication as to where else he could seek assistance from. So, he was required to conduct his own investigation.

• After contacting Ascot, he felt that it was completing checks in an attempt to avoid paying his benefits from the Plan. Those checks included an investigation into the possibility that he had transferred out of the Plan. This caused him to suspect that Ascot considered his benefits claim to be fraudulent.

• He had calculated that the 2019 Transfer Quotation was understated, having compared the ratio of fund value to quoted pension from the Plan with figures from other DB and DC arrangements he held benefits in.

• He had provided evidence of an enhanced transfer option but Ascot and the Trustee failed to send copies of the communications regarding that point. He ought, in any case, to have been offered the enhanced transfer option in 2016 but was not.

• The distress and inconvenience he had suffered as a result of Ascot and the Trustee’s poor service had not been recognised.

In June 2021, HS Administrative Services Limited acquired the pensions administration book of business from Ascot.

On 8 July 2021, the Trustee wrote to Mr S and reiterated the information previously provided in its letter of 26 March 2021. In summary the Trustee also said:-

• His claim for loss of investment opportunity was not upheld because he would have needed to obtain financial advice before transferring out of the Plan to a personal pension, since the DB benefits in the Plan were valued in excess of £30,000. He would only then have been able to claim up to 25% of the benefits as a tax-free lump sum. The remaining portion of his fund value would have been taxed at a rate of 45% since the total fund value was over £150,000. Consequently, claiming the full fund value as a lump sum may not have been financially viable. However, financial advice may have clarified this point.

10 CAS-64504-Z5R7 • It would also have been challenging for him to provide definitive evidence that he could have purchased a property but for the delay in providing a CETV quotation, or that he would have transferred out of the Plan and used the funds to purchase a property. As he had disputed the figures provided in the 2019 Transfer Quotation it was unlikely that he would have done so. Even if he had purchased a property; a tenant would then have been needed to provide rental income. There were too many uncertainties to establish what actions he would have taken but for the delays. Consequently, it was not possible to quantify any financial detriment he had suffered.

• Exercises such as the ‘enhanced transfer’ option he had referred to were initiated by employers and a trustee may not be notified at the time. The only evidence the Trustee had regarding an enhanced transfer option relating to the Fund was “inconclusive” minutes from a meeting held on 28 November 2007. Consequently, his claim regarding a missed opportunity to consider the enhanced transfer option was also not upheld. However, this decision would be reviewed, if he provided evidence that an enhanced transfer option was actually offered to some members of the Plan in 2016.

• A £2,000 award was appropriate in recognition of the severe distress and inconvenience he had suffered as a result of the delay in identifying him as a member of the Plan.

In May 2022, HS Administrative Services Limited changed its name to HS Pensions Limited. In November 2022, HS Pensions Limited was acquired by Link Group Plc.

In January 2023, his NRD, Mr S’ benefits were put into payment on the basis that, as stated in the 2019 Statement, the transferred-in pension was non-increasing in payment. In exercising his retirement options, Mr S elected to take the maximum lump sum with a lower annual pension.

In May 2024, Link Group Plc was acquired by Mitsubishi UFJ Trust & Banking Corporation, a subsidiary of Mitsubishi UFJ Financial Group. Since May 2024, MUFG has been the administrator of the Plan.

Summary of Mr S’ position

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12 CAS-64504-Z5R7

Summary of MUFG and the Trustee’s position

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Conclusions

14 CAS-64504-Z5R7

Revaluation and increases in payment

Mr S contends that the transfer from Hodgson should be revalued in the same way as the benefits in excess of the transfer value both before and after the NRD. Mr S says that the Trustee’s failure to calculate his benefits in that way has caused him financial detriment. The Trustee and MUFG contend that the pension granted in respect of such transfer under the Fund and transferred to the Plan was a fixed pension which was not subject to revaluation or increases whilst in payment.

To determine the terms of the benefits granted in respect of the transfer from Hodgson, it is necessary to examine the surviving contemporaneous documents and any later documents evidencing what benefits were granted by the trustee of Fund at the time. Key documents are the terms governing the Fund at the time and the 1989 Transfer Quotation.

At the time of the transfer, the Fund was governed by the Interim Deed and as stated in recital (B) to the Interim Deed, the benefits were as notified to members in the Explanatory Booklet (dated May 1988) and subject to other provisions of the Interim Deed. These included a provision at Clause 12 requiring that the Fund be operated in conformity with the contracting-out requirements of the Social Security Pensions Act 1975 (the 1975 Act) if a contracting-out certificate was in force and notwithstanding

15 CAS-64504-Z5R7 any contrary provision in the Interim Deed. Clause 1(C) provided that references to legislation were to such legislation as modified or replaced.

The Interim Deed also included a provision for accepting transfers in as follows:-

“5. The Trustees shall have power with the consent of the Principal Employer to accept for inclusion in the Fund from any retirement benefits arrangement (hereinafter called “the Other Arrangement”) specifically approved for the purposes of this Clause by the Board of Inland Revenue any cash sum or other assets which the trustees thereof or any person or persons having the necessary powers thereunder (hereinafter called “the Transferor”) may be authorised to pay or transfer to them in respect of a Member and the Trustees shall confer on him such rights under the Plan as are determined by the Actuary to be equal in value to the assets so received…”

This was subject to a number of provisos. Proviso E to Clause 5 of the Interim Deed required EYMS to ascertain from the transferring trustees the period of service to which the transfer related.

Proviso G to Clause 5 provided that if the relevant member was in contracted-out employment by reference to the Fund and had a GMP in relation to the “Other Arrangement”, acceptance of the assets representing the member’s GMP and the widow’s GMP, as determined by the actuary, would be in accordance with section 38 of the 1975 Act and on terms compliant with related regulations. Other regulations made at the time under section 38 of the 1975 Act provided, in effect, that the contracting out provisions of the 1975 Act would apply after a transfer in respect of periods of service that had been contracted-out under the transferring scheme.

In effect, the Interim Deed permitted EYMS to accept a transfer and grant such benefits as the Fund actuary determined were equal in value to the transfer, provided that if the transfer included amounts in respect of GMP rights, the benefits granted in the Fund had to also include GMP rights for any periods of service that had been contracted out under the transferring scheme.

The 1989 Transfer Quotation was issued to Mr S after he became a member of the Fund and provided the basis on which he opted to transfer his benefits from Hodgson to the Fund. I find that it is a contractual document issued pursuant to EYMS’ power under Clause 5 of the Interim Deed and signed by Mr S to indicate his agreement to the transfer terms. It quoted the amount of the transfer as £4,562 and provided that, if the transfer was received, Mr S would be entitled to “the following additional benefits…”. These were listed as a pension from January 2023 of £6,539.60 a year, a widow’s pension on death before and after retirement of £3,269.80 and a lump sum on death before retirement.

Beneath those details was the following: “Note that the guaranteed minimum payment from the previous scheme, including revaluation to the State Pension Age are included. The balance of the benefit includes revaluation at 5% p.a. up to your Normal Retirement Date.” 16 CAS-64504-Z5R7 The 1989 Transfer Quotation also included a statement that “All benefits will be paid in the same way as your normal scheme benefits”. For general information about the Fund, it directed Mr S to the Explanatory Booklet or to write to the trustees.

The issue is to determine what rights were granted under the 1989 Transfer Quotation read against the background of the Interim Deed, including in particular Clause 5 and Clause 12, and the Explanatory Booklet which at the time was the document detailing the benefits provided under the Fund.

Given the terms of Clause 5 and Clause 12 (and Clause 1(C)), I find that the terms of the benefits that could be granted under the Interim Deed were required to be consistent with contracting-out legislation at the time (including amendments made to the 1975 Act and in force at the time of the transfer). Any GMP earned in respect of service from 6 April 1988 was required to increase in payment by the Fund in line with price inflation (RPI at the time) or 3% if lower. Any GMP earned by someone who had left service was required to be increased at a fixed rate or on an earnings related basis.

In support of their view that the pension was a fixed non-increasing amount, the Trustee and MUFG have stated that it was common practice at the time to grant fixed pensions in respect of transfers, rather than additional years of pensionable service, but otherwise note that they have no direct knowledge of the events.

Given the wording of the 1989 Transfer Quotation, a fixed pension at NRD is clearly what was granted, namely a pension of £6,539.60 a year from Mr S’ NRD (and SPA) in January 2023, together with a widow’s pension on death before and after retirement of £3,269.80 and a lump sum on death before retirement. The widow’s pension was 50% of Mr S’ pension which was consistent with the general benefit terms in the Explanatory Booklet and with GMP legislation at the time.

Given the wording about such pension including revaluation of the GMP at 3% and of the balance at 5%, I find that the pension granted was of a fixed amount at NRD and was calculated in a manner that included revaluation (increases required to be applied in respect of the period between Mr S leaving service and his NRD (or SPA)) at a rate that was at or above the maximum rate then required by legislation for the period from his transfer to his NRD (or SPA). I find that the pension granted on this basis was therefore compliant with revaluation requirements and calculated by incorporating such revaluation. Later legislation has never increased revaluation requirements above those stated in the 1989 Transfer Quotation as having been included in the calculation of the fixed pension of £6,539.60 per year. As such, I find that no further increases in respect of revaluation were required to be applied to Mr S’ pension when he reached age 65 (i.e. the date from which such pension was payable (NRD) and from which his GMP was payable (SPA)).

However, the concept of a fixed pension at NRD, as an alternative way of giving effect to a transfer rather than years of pensionable service to provide a pension

17 CAS-64504-Z5R7 based on fractions of current or future pay, does not require the pension to be fixed in the sense of being non-increasing after NRD.

There was no explicit wording about increases in payment in the 1989 Transfer Quotation. However, it included a statement that “All benefits will be paid in the same way as your normal scheme benefits” and referred to the Explanatory Booklet. The terms in the Explanatory Booklet included provision for increases in payment, essentially, in line with prices up to 3% on both the GMP and excess.

The Trustee and MUFG contend that this statement referred only to the payment methods and not to the increase provisions. I do not agree for two reasons:

• Such a restrictive reading would result in the benefits not being fully defined and the reference to the Explanatory Booklet for further information about the benefits being meaningless. There were other details about the benefit terms, beyond payment methods, that were necessary for defining the benefits and that were included in the Explanatory Booklet to which the Quotation referred such as benefit options, including early and late retirement, commutation and onward transfer rights, as well as a 5 year guarantee and provision for increases in payment. If the statement were interpreted as being limited to payment methods, it is not clear why the 1989 Transfer Quotation referred to the Explanatory Booklet.

• Mr S was transferring from a contracted-out scheme and his rights included GMP rights in respect of service after April 1988 so that EYMS would have been in breach of the Interim Deed and legislation had it granted Mr S a pension that did not as a minimum include provision for increases on his post-88 GMP at or above the minimum statutory rate.

I find that instead the statement should be construed as providing that all other provisions of the Explanatory Booklet would apply, so far as not being inconsistent with the explicit terms of the 1989 Transfer Quotation including in particular the amount of his pension at NRD (and the widow’s pension at death).

I therefore interpret the 1989 Transfer Quotation as providing Mr S a pension of an amount that was fixed at NRD, having been calculated in a manner that incorporated the highest rates of revaluation required by legislation on both his GMP and the excess of GMP portion of the benefits, but subject to increases in payment as provided in the Explanatory Booklet (which defined how his “normal pension benefits” would be paid). The Explanatory Booklet provided at page 22 for increases on pension in payment at the lower of RPI and 3% and in line with prices up to 3% on the GMP. The increases on the GMP were not limited to the post-88 GMP.

I find support for this interpretation in the 1991 Leaver Statement which confirmed Mr S’ benefits would be paid in accordance with the Interim Deed, as summarised in the Explanatory Booklet, and that the benefits shown “included those purchased by the transfer value received from [Hodgson]” and included a statement that “once in payment your pension increases on a regular basis”. That statement did not distinguish or exclude the benefits purchased with the transfer. The 1991 Leaver 18 CAS-64504-Z5R7 Statement is effectively evidence that at that time, increases in payment were believed by EYMS to apply to his benefits transferred from Hodgson.

The August 1991 Statement provides similar support. It appears to be an annual benefit statement assuming he was going to remain in service (even though by then he had left service). In the section headed “On Retirement”, it included that he would “in addition” receive a pension of £6,539.60. It then included a section headed “After Retirement” detailing the spouse pension and 5 year guarantee and then under the heading “Additional Information” it included a statement that “Pensions paid by the scheme are increased each year during payment. See your explanatory booklet for details.” Nothing in the “Additional Information” section indicates that the pension increases would not apply to all pensions listed above and I interpret it as meaning that the increases set out in the Explanatory Booklet would apply to the additional £6,539.60 pension granted in respect of the transfer and the spouse pension.

The November 1991 Statement (a transfer out statement) sent by EYMS to Mr S quoted benefits, provides further support. It included a pension of £7,193.60 per year calculated at the date of leaving and an estimated total pension of £10,145.72 a year from his NRD. The whole amount is stated as increasing at “3% p.a. in payment”. As a transfer out quotation, it may have been calculated on the assumption that inflation would not be below 3%. In any event, it is further evidence that EYMS considered the transferred in benefits to be subject to increases in payment.

So, I find that under the Fund, and in relation to the transfer from Hodgson, Mr S was entitled to a pension of £6,539.60 per year from his NRD, with annual increases in payment at the lower of the applicable rate of price inflation and 3%. Revaluation having already been applied to the transfer value of £6,539.60, no additional revaluation was applicable before NRD.

Mr S’ benefits were transferred to the Plan under a merger of the Fund and the Plan. While I have not seen the documents governing the merger, the Merger Briefing stated, “that the merger of the two pension schemes will not affect the amount or eventual payment of your pension and that it will be payable to you on the same terms as previously advised”. I find that the benefits payable to Mr S under the Plan should be calculated in the same manner as they would have been under the Fund. Consequently, his benefits in respect of the Hodgson transfer and as provided under terms of the 1989 Transfer Quotation, remained applicable under the Plan following the Merger.

I find that in reinstating his benefit in 2019, the Trustee and MUFG were wrong to provide that Mr S’ benefits granted by the Fund in respect of his transfer from Hodgson would not increase in payment after the NRD. The 2019 Statement was incorrect in this regard.

I find that the whole of the retirement pension, meaning those benefits payable from the NRD to Mr S (and any widow’s pension payable after his death) in respect of his transfer from Hodgson, including both GMP and non-GMP elements and including

19 CAS-64504-Z5R7 both pre-88 and post-88 GMP, are subject to annual increases in payment at a rate of 3% per annum or the increase in the appropriate index of retail prices under the Plan (whichever is lower).

Early retirement

Under the Rules of the Plan and, as relevant pursuant to the terms of the Merger, under the provisions governing Mr S’ benefits under the Fund, including the 1989 Transfer Quotation and the Explanatory Booklet, the option of retiring early is subject to an actuarial reduction. As such, the value of his benefits had he retired early would have been the same, on an actuarial basis, as the value of the benefits he is entitled to receive having retired at NRD. I therefore cannot find that Mr S has suffered any loss in respect of being unable to retire early. I need make no further findings in relation to this aspect of Mr S’ complaint.

Retirement at NRD

Since Mr S’ retirement at NRD in January 2023, he has foregone annual increases in payment, which means there are arrears of pension due to him. It would also appear there are arrears relating to the manner in which his benefits were put into payment at NRD, as it was then understood that his transferred in pension was non-increasing in payment.

At retirement, Mr S commuted the maximum amount of pension for lump sum. MUFG has confirmed that a different commutation factor was used in relation to his non- increasing transferred-in pension than the one in relation to his increasing pension accrued in the Fund, which was higher in order to reflect the different benefits. The more generous factor would have applied to the transferred-in pension if it had been recognised that it carried increases. MUFG has confirmed there are two consequences from this: there would have been a higher lump sum available to Mr S at retirement and a higher starting pension (as, due to the factor used, less pension needed to be commuted to achieve a higher lump sum figure).

Mr S has confirmed that he would have elected to take the maximum lump sum available to him, regardless of the calculation variations due to different factors being used. I accept this submission and find that he would have taken the maximum lump sum.

The result is that there are outstanding arrears in relation to Mr S’ lump sum and pension due to the way his benefits were put into payment. I find the Trustees should pay these arrears, plus interest for late payment. The lump sum would also have been paid free of tax. Therefore, to the extent that there are any tax charges arising from the late payment of the lump sum the Trustees are also responsible for settling these, so that Mr S is not adversely affected by the miscalculation in January 2023 and in a worse position than he would have been had the lump sum been calculated correctly.

20 CAS-64504-Z5R7 Maladministration

Mr S’ member record was deleted in error before MUFG became administrator of the Plan. Consequently, MUFG cannot be held responsible for that error. However, following an initial delay caused by Ascot inappropriately asking Mr S to contact Mercer in November 2018, the Trustee eventually identified his benefit entitlement in May 2019. I find that the Trustee’s award of £2,000 to Mr S was sufficient recognition of the distress and inconvenience he suffered as a result of the delay. I also consider that it is sufficient recognition of the further distress and inconvenience he may have suffered as a result of the failure to reinstate his pension in respect of the Hodgson transfer on a basis providing for increases in payment. Mr S should contact the Trustee if he would now like to accept the £2,000 award (this is included in my direction below and not additional to it).

I partly uphold Mr S’ complaint.

Directions

Within 14 days of the date of my Determination, the Trustee shall:

• Recalculate Mr S’ retirement pension and lump sum on the basis of:

o The pre-commutation pension granted in respect of his transfer from the Hodgson Scheme being £6,539.60 per year payable from NRD (the Hodgson Element) and subject to annual increases in payment at the lower of the applicable rate of price inflation and 3%; and

o Application of an equivalent commutation factor in respect of the Hodgson Element, based on the same assumptions as generally used for pension commencement lump sum commutation under the Plan at his NRD and taking account of the annual increases payable on the pension when in payment, to determine the lump sum and remaining pension that would have been payable if such commutation factor had been applied in calculating his lump sum and remaining pension at NRD;

• Calculate any shortfall in Mr S’ lump sum and pension instalments paid to him since NRD in respect of the failure to apply the previously mentioned increases and commutation factor;

• Pay the shortfall, together with interest on the above sums calculated at the Bank of England base rate in respect of the period from the date the lump sum and each pension instalment was originally paid to the date the shortfall is paid;

• To the extent that the shortfall lump sum payment is not recognised by HMRC as part of Mr S’ pension commencement lump sum, pay any tax payable in respect of the shortfall lump sum payment.

• Amend Mr S’ member record to reflect the above recalculation, and that the Hodgson Element of his pension and of the widow’s pension are subject to annual increases when in payment in line with the increase in the CPI, subject to a

21 CAS-64504-Z5R7 maximum of 3% per year.

• Pay Mr S £2,000 in recognition of the severe distress and inconvenience he has suffered.

Camilla Barry

Deputy Pensions Ombudsman 18 February 2026

Appendix 1 Extracts from the Explanatory Booklet 22 CAS-64504-Z5R7 Page 22 of the Explanatory Booklet stated:

“Your Fund Pension

Because your Fund pension is based on your earnings shortly before you retire…it should reflect changes in the cost of living up to that time. After you retire your pension will be increased by the rise in the Retail Prices Index subject to a maximum increase of 3% per [year] compound, the first increase being made on the anniversary of your retirement. Any spouse’s pension will be similarly increased.

[…]

[GMP]

The [GMP] is that part of your Fund pension which [EYMS] provides instead of the State. The State in conjunction with the Fund, guarantees increases on your GMP in line with prices, after State Pension Age.

The Fund pays up to the maximum of 3% as described above with the State guaranteeing any balance.”

Page 24 of the Explanatory Booklet stated:

“Your full accrued pension would be payable from [the NRD] and in order to protect it against the effects of inflation between the date of leaving and retirement, the pension would consist of the following components:

a) Your GMP at the date of leaving;

b) Your basic [deferred] pension in excess of (a);

c) An increase in (a) at the rate of [7.5%] per [year] compound for each complete tax year between your date of leaving and your [NRD];

An increase in (b) at the rate of 5% per [year] compound or the rise in the Retail Prices Index, whichever is the lesser, for each complete year between your date of leaving and your [NRD].”

Appendix 2 Chapter 2 of the Pension Schemes Act 1993 provides that:-

23 CAS-64504-Z5R7 109 Annual increase of guaranteed minimum pensions.

(1) The Secretary of State shall in each tax year review the general level of prices in Great Britain for the period of 12 months commencing at the end of the period last reviewed under this section.

(2) Where it appears to the Secretary of State that that level has increased at the end of the period under review, he shall lay before Parliament the draft of an order specifying a percentage by which there is to be an increase of the rate of that part of guaranteed minimum pensions which is attributable to earnings factors for the tax years in the relevant period] for—

(a) earners who have attained pensionable age; and

(b) widows, widowers and surviving civil partners].

(3) The percentage shall be—

(a) the percentage by which that level has increased at the end of the period under review; or

(b) 3 per cent, whichever is less.

(3A) The relevant period is the period—

(a) beginning with the tax year 1988-89, and

(b) ending with the last tax year that begins before the principal appointed day

(4) If a draft order laid before Parliament in pursuance of this section is approved by a resolution of each House, the Secretary of State shall make the order in the form of the draft.

(5) An order under this section shall be so framed as to bring the alterations to which it relates into force on the first day of the next tax year after that in which the order is made.

(6) Where the benefits mentioned in section 46(1) to (7) are not increased on the day on which an order under this section takes effect, the order shall be treated for the purposes of that section as not taking effect until the day on which those benefits are next increased.

24