British Transport Police Force Superannuation Fund 1970 Section Cas · CAS-98967-Y0T1

CAS-98967-Y0T1

Ombudsman’s Determination Applicant Ms T

Scheme British Transport Police Force Superannuation Fund - 1970 Section (the Fund)

Respondent Railpen Ltd (Railpen)

Outcome

Complaint summary Ms T complained that she was not informed that an early reduction factor would be applied to her pension benefits if she was to leave active service before her normal retirement age (NRA). She was also unhappy with the time taken to respond to her complaint.

Background information, including submissions from the parties

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“Normal retirement benefits

These can be taken at your Normal Pension Age (NPA), which is age 55 for active members.

5 CAS-98967-Y0T1 Preserved benefits

If you leave the Fund before you are able to take your benefits, you become a ‘preserved’ (or ‘deferred’) member. This means you don’t pay any more contributions, and your benefits are based on membership and your final average salary over the 12 months before your leaving date.

Your preserved benefits increase each year in line with Orders made under the Pensions (Increase) Act 1971 and in line with Fund Rules, from the date that your active membership ends…

…

The age from which your preserved benefits (sometimes referred to as ‘deferred benefits’) are payable, is 65. You can claim your benefits from age 55 but these will be reduced by an early retirement factor.”

1 www.btppensions.co.uk

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• Her decision to leave her employer was made based on Railpen’s email of 22 September 2020, stating that her pension would be “preserved” and payable at age 55.

• She is unhappy that her projected pension benefits decreased by nearly half because she left the Fund eleven months before her NRA.

• There was no mention of the reduction factor or having to work until 65 to reach her NRA in the December 2020 statement, which said she could take her pension at 55 or 60.

• Railpen took over seven months to respond to her IDRP complaint.

• When members of the Fund who joined after April 2007 change their status from active to preserved, their NRA changes from 55 to 65. Ms T was sent the Members’ Guide when she joined the Fund in 2008 and the Focus newsletter in December 2009 which both contained this information. The information is also on the Fund’s website.

• The reduction factor of 0.514 applied to Ms T’s pension benefits in the August 2021 estimate was correct.

• There were wording errors in the December 2020 statement. The statement said Ms T had the option to take her preserved benefits from anytime between her then age of 54 and 60. It should have said she could take her preserved benefits between age 55 and 65. The statement also said she must put her pension benefits into payment before age 75. This should have said age 65.

• Nonetheless, Ms T was sent multiple communications which correctly confirmed her NRA would be 65 if she left employment and preserved her benefits.

Adjudicator’s Opinion

7 CAS-98967-Y0T1 • The Rules state that an active member of the Fund has a NRA of 55. If a member who joined after April 2007, such as Ms T, leaves active membership of the Fund before their NRA, their benefits become deferred (or preserved) and their NRA is adjusted to 65. In other words, to receive pension benefits without an actuarial reduction applied, a member can either remain employed and an active member of the Fund until at least age 55, or a deferred member and take their pension benefits unreduced at age 65.

• The Members’ Guide, the 2009 Focus newsletter and the Fund’s website explained the relevant rule.

• Ms T said she was specifically told in correspondence from Railpen dated 22 September 2020 that she could still take her pension benefits unreduced at age 55 if she left the Fund and ceased her pension contributions before her NRA.

• Railpen sent Ms T an email on 22 September 2020 which said:

“your contributions to the scheme would stop and your benefits would become preserved in the scheme. Your preserved benefits would be payable from your normal retirement age of 55 which is the earliest you are eligible to apply for payment”.

• Ms T was under the misapprehension that “preserved” meant her benefits would be maintained in their original or existing state. This was not the case. Preserved or deferred pension benefits simply meant they were held in the Fund to be paid at a later date.

• In the Adjudicator’s opinion, Railpen did not misinform Ms T that she could take her pension benefits unreduced at age 55 if she resigned from her employer and became a deferred member of the Fund. In the Adjudicator’s view, this aspect of Ms T’s complaint should not be upheld.

• The December 2020 statement contained several errors. Railpen had acknowledged the errors and apologised. The statement was provided after Ms T had resigned from her employer. So, while it included wording errors, it did not impact on her decision to leave her employer and become a deferred member of the Fund. Nonetheless, the errors amounted to maladministration, and it was reasonable to accept they added to Ms T’s concerns about her pension benefits. In the Adjudicator’s view, this aspect of the complaint should be upheld.

• The Pension Regulator expects that an IDRP decision should be made within a maximum of four calendar months from receiving an IDRP complaint application. Applicants should be notified of the decision no later than 15 working days after the decision has been made.2 It took the Committee over six months to provide its decision. This was not reasonable.

2 https://www.thepensionsregulator.gov.uk/-/media/thepensionsregulator/files/import/pdf/code-11-dispute-

resolution.ashx 8 CAS-98967-Y0T1 • Although Railpen sent Ms T a letter explaining the reason for the delay, the additional time taken would have added to Ms T’s concerns at a time when she had no income. In its IDRP response, the Committee gave no apology for the delay and offered no compensation. In the Adjudicator’s opinion, this aspect of the complaint should be upheld.

• The errors within the December 2020 statement and the delay in responding to Ms T’s stage two appeal would have caused Ms T significant distress and inconvenience. An award of £500 was appropriate and in line with the Ombudsman’s guidance on non-financial injustice.

Ms T did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Ms T provided her further comments which are summarised below:-

• As a lay person, she expects all correspondence sent to her regarding her pension to be in a language that is unambiguous, clear and accurate. Therefore, when Railpen told her that her fund was “preserved” until her NRA of 55 in its email of 22 September 2020, it should mean exactly that. Had she not received that email, she would not have left the Force or the Fund eleven months before her NRA.

• She still does not understand if she can draw her pension unreduced from age 60 or 65.

• When she joined the Fund in 2008, she bought additional years of service in the Fund. She believes the backdated service in the Fund should mean she “joined” the Fund in 2003, so the post 2007 Rules should not apply to her.

• The stress caused by this matter has had an enormous impact on her mental health and her physical well-being.

I have considered Ms T’s comments but they do not change the outcome, I agree with the Adjudicator’s Opinion.

Ombudsman’s decision The main issue in this complaint is Ms T’s interpretation of Railpen’s email to her on 22 September 2020. It said that if she were to leave the Fund, her benefits would become preserved and would be payable from her [NRA] of 55, or later.

In pension terms, “preserved” and “deferred” benefits are interchangeable, they mean the same thing. When a member is no longer contributing to a pension scheme but has not yet drawn their benefits from it, the benefits are referred to as preserved or deferred in the scheme.

I note that the Members’ guide specifically refers to “preserved benefits (sometimes referred to as ‘deferred benefits’)”. An internet search for preserved benefits would also have clarified that the two terms are interchangable. 9 CAS-98967-Y0T1 It is unfortunate that Ms T was not aware of the term and assumed preserved was meant in a literal sense. However, since there was no misinformation in Railpen’s email, I do not uphold this aspect of the complaint.

As explained by the Adjudicator, as a deferred member, to receive her full pension benefits unreduced, Ms T cannot take her pension benefits before her NRA, which is 65.

I acknowledge that Ms T will have suffered significant distress and inconvenience, as a result of the errors within the December 2020 statement and the delay in responding to her stage two IDRP appeal, which should be recognised.

For this reason, I partly uphold Ms T’s complaint.

Directions

Anthony Arter CBE

Deputy Pensions Ombudsman

25 March 2024

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Appendix 1 The Trust Deed and Rules for the Fund

1. As relevant, Part VIII of Schedule 1A provides:

“21 Special Provisions Regarding Deferred Benefits; Reduced Immediate Benefits

(1) This rule applies to a former Member who has…not yet become a Pensioner.

…

(3) (a) the former Member, if he has left Service or, if he has not left Service, if the Trustee consents, may elect, subject to the provisions of this sub-rule, that instead of the benefits he is entitled to under rule 20 he shall receive a pension payable from age 65 and ceasing on his death, and a lump sum payable on the day his pension becomes payable.

(b) benefits may not be payable under this sub-rule before his normal minimum pension age (which has the meaning given to it in section 279 of the Finance Act 2004)…

(c) elections under this sub-rule shall be subject to the consent of the Trustee.

(d) the basis on which the election may be made shall be determined by the Trustee after obtaining advice from the Actuary and after agreement with the Employers.

(e) if an election under this sub-rule would result in the pension payable to the former Member being less than whichever is the lesser on the date his pension would become payable:

(i) his Contracted-Out Pension, or

(ii) his Forecast Guaranteed Minimum Pension,

the election shall not be permitted.”

2. As relevant, section 279 of the Finance Act 2004 provides:

“normal minimum pension age” means— … (b) in relation to, and to a member of, a uniformed services pension scheme— o (i) before 6 April 2010, 50, and o (ii) on and after that date, 55,”

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Appendix 2 From THE FAQ section of the BTP Pensions website

1. “What is my Normal Retirement Age (NRA)?

Your NRA is the age from which you can take your full pension benefits without any reduction factors applied for early retirement. You may be able to take your benefits earlier than your NRA, but they will be reduced depending on how early you take them.

The table below shows when members of each Section can take their benefits without any reductions.

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2007 Section [3] 55 if taking benefits immediately upon leaving service. 65 if taking benefits from preserved status.”

3 The 2007 section is for members who joined between 1 April 2007 and 31 March 2015.

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