British Steel Pension Scheme · CAS-45169-P1G3

CAS-45169-P1G3

Ombudsman’s Determination Applicant Mr S

Scheme British Steel Pension Scheme (the Scheme)

Respondent British Steel Pension Fund Trustee Limited (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties In December 1966, Mr S joined the Steel Company of Wales pension scheme which became the OBSPS.

In December 2011, Mr S retired and received his pension benefits from OBSPS. His pension benefits consisted mainly of Guaranteed Minimum Pension (GMP) accrued before 1988 plus a small element of excess pension built up prior to April 1997.

In August 2017, Mr S was sent a Time to Choose booklet which said that he had to choose between two options:

• Switch to the Scheme which provided the same benefits as the OBSPS but with lower future increases; or

• Remain in the OBSPS but this would move into the Pension Protection Fund (PPF)

On 2 October 2017, Mr S was sent a further letter regarding Time to Choose which included an option form for him to complete.

Mr S completed the option form to indicate that he wished to switch to the Scheme.

1 CAS-45169-P1G3 On 28 March 2018, Mr S’ switch to the Scheme took place.

On 18 May 2019, Mr S sent an email to the Scheme Administrator and said:

• He did not believe that the Scheme had complied with the information he had been previously supplied. He had not had an increase in two years, and this was contrary to his expectations.

• There was a large pension fund so how was it not managed it to make a profit for the members.

• He tried to transfer out of the OBSPS in 2011 but the Trustee would not allow him to leave and transfer his fund to a different provider. He believed as the Trustee refused to release him it needed to uphold the terms of the Scheme.

On 3 June 2019, the Trustee sent a response under stage one of the Scheme’s Internal Dispute Resolution Procedure (IDRP). It said:-

• The communications issued by the Trustee of the OBSPS during the Time to Choose exercise had made clear that future increases to pensions would be at a lower rate than had previously applied. An explicit explanation of the increases which would be applied in the Scheme was contained within the Time to Choose pack:

Part of your pension Increases with the Increases with the PPF Scheme

GMP built up between None None 1978 and 1988 GMP built up between Consumer Price Index None 1988 and 1997 (CPI) capped at 3% a year Excess pension over None None GMP built up to 1997

• Mr S’ Time to Choose option form contained the following disclaimer:

“By choosing the Scheme you understand and agree that:

o My benefits in the Scheme as described in this pack will replace all of the benefits I had in the current scheme.

…

o The rules of the current scheme are being changed so that I can switch to the Scheme as described in the pack.”

• Mr S’ GMP was not subject to indexation under the Rules of the Scheme which was unchanged from the Rules of the OBSPS. 2 CAS-45169-P1G3 • The balance of Mr S’ pension was excess pension built up prior to April 1997 which was increasable under the Rules of the OBSPS but not under the Rules of the Scheme.

• Since transferring to the Scheme Mr S’ pension had been subject to the correct level of annual increases.

• The Rules of the Scheme determined Mr S’ entitlement to pension benefits not the investment return.

On 7 June 2019, Mr S sent an email to the Trustee and said:-

• He received a letter in in March 2018 stating that his annual pension was £1,346.88 and it would remain at that level from 1 April 2018. He then received a letter in March 2019 which notified his annual pension would again be £1,346.88.

• The Trustee has said that there would be a reduced pension increase but did not say that there would be no increase. His pension is now decreasing each year due to inflation and his state pension is not increasing to compensate for this.

• He was still in dispute with the Trustee regarding how his application to leave the OBSPS was managed. He was told that he could not transfer as he was age 64 but he has never been able to find the information in the Rules that showed that his age meant he could not transfer.

On 10 July 2019, the Trustee sent a letter to Mr S and said in summary:-

• Mr S was a pensioner member having retired at Normal Pension Age under the OBSPS.

• Mr S joined the Scheme on 28 March 2018 having completed the option form sent to him as part of the Time to Choose exercise in 2017.

• Mr S’ annual pension was accrued between 4 December 1966 and 30 August 1980 and comprised of:

GMP 1,262.04

Excess over GMP 84.84

Total 1,346.88

• Increases to pensions in payment in the Scheme were calculated in accordance with the Scheme’s governing documentation. The provisions in respect of increases to the pensions were set out in Section B(6) of schedule 10 of the Framework Agreement:

Pensions in payment Increases to pensions in payment including those increases derived from Additional Voluntary Contributions will be

3 CAS-45169-P1G3 at statutory minimum levels which are currently as follows:

i) CPI increases capped at 3% on post 88 GMP. ii) No increases in respect of other pre 97 pension. iii) CPI increases capped at 5% in respect of post 5 April 1997 pre 6 April 2005 pension. iv) CPI increases capped at 2.5% in respect of post 5 April 2005 pension

• The majority of Mr S’ Scheme pension was pre 1988 GMP and this was not increased once it comes into payment. The balance of Mr S’ pension, £84.84, was earned over the period 1966 -1980 and so was treated as “other pre 97 pension”. There are no increases due on this element of pension under the Scheme Rules.

• The Trustee was obliged to act in accordance with the Scheme’s governing documentation. Pensions and other benefits payable from the Scheme are calculated according to the Scheme Rules and were not directly linked to the investment return achieved on scheme assets.

Summary of Mr S’ position:-

• The fact that part of his pension was indexed before the formation of the Scheme has not been explained.

• He has not been able to find any information to say why he could not transfer out of the OBSPS in 2011 when he was age 64.

• He does not think that the Scheme is being administered correctly as his Scheme pension does not increase and his state pension does not make up for any deficit.

• Tata Steel have now offered Scheme members a restoration payment and the fact that it has done this shows that his pension was not indexed correctly.

Summary of the Trustee’s position:-

• Mr S’ complaint regarding GMP has been raised previously and has already been considered formally by the Trustee Board.

Adjudicator’s Opinion

4 CAS-45169-P1G3 • The Trustee had provided Mr S with information regarding how his pension would change if he moved to the Scheme in the Time to Choose exercise.

• There was no change to Mr S’ pre 1988 GMP which already had no increases. Mr S’ post 1997 excess pension changed to a position where it would no longer receive any increases.

• Mr S signed an option form to say that he agreed to the transfer to the Scheme, and he accepted that the Scheme benefits would replace those he had in OBSPS.

• In the Adjudicator’s opinion it was clearly explained to Mr S that that there would be no further increases on his post 1997 excess pension following the transfer to the Scheme. Further, there was no evidence that the Scheme was not being administered correctly in accordance with the Rules. In the circumstances there had been no maladministration.

• The Adjudicator also said that Mr S had raised a number of further complaints that were not part of his original submission.

o Mr S complained that his GMP has not been correctly accrued and then administered as his state pension did not make up for the lack of increase in his GMP. The Adjudicator noted that Mr S has contacted the Department of Work and Pensions and HM Revenue and Customs, and both had said his state pension was operating correctly. The Trustee had also said that Mr S’ complaint regarding his GMP has been raised previously and the Trustee Board has already issued a formal response to the complaint. This complaint did not form part of Mr S’ current complaint and so the Adjudicator said they would not be dealing with it in their Opinion.

o Mr S also complained that he was not able to transfer his pension in 2011 as he was age 64. This complaint was about an issue that took place before Mr S became a Scheme member and related to the OBSPS so could not be considered here. In addition, in most cases applications to the Pensions Ombudsman need to be made within three years of the event being complained about or if later within three years of when the individual became aware of this issue or should have been aware of it. As Mr S was aware that he could not transfer his pension in 2011 this complaint issue was outside the time limits for bringing a complaint to the Pensions Ombudsman.

o The complaint regarding the restoration payment was a new issue and Mr S should raise this with the Trustee in the first instance.

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

• He did not think that the Adjudicator had understood the problem. In 2018 the choice was either to go into the PPF with a lower expectation or move to the new pension scheme with possibly a lower increase rate. It seemed that both sets of

5 CAS-45169-P1G3 funds were consolidated so a segregation of how the funds were accrued did not now seem to be applicable. He did not agree to receiving no increment and expected a small increment each year. He would like to see where in the Time to Choose document it said that there would be no increases.

• He was still in dispute with the DWP as it assumes he is getting a certain level of pension which is incremented each year. His state pension with deductions has not kept up with inflation as they do not seem to account for private pensions not being indexed.

• He was contracted out of SERPs without his knowledge or consent. He would like to see any papers he signed to agree to contracting out. The Scheme would never tell him how much his accrued pension fund was. He would have thought that was a reasonable request to find out how much was accrued.

• He believed Tata Steel had not behaved fairly as after being allowed to rid itself of the OBSPS it has declared a £365 million profit.

• He thought the Adjudicator should have considered the poor performance of the Scheme. It had a multimillion pound fund and a shrinking membership, and it had not been able to keep up with inflation. On 13 July 2022 it had 6,175 members and £9.9 billion in assets even just looking at the returns available on the high street the Scheme should have achieved a better performance.

• He would like to know did the Scheme staff and the Trustees get salary increases each year while Scheme members were getting minimal increases or in his case zero increases.

I agree with the Adjudicator’s Opinion and note the additional points raised by Mr S.

Ombudsman’s decision

6 CAS-45169-P1G3 Part of your pension Increases with the Increases with the PPF Scheme

GMP built up between None None 1978 and 1988 Excess pension over None None GMP built up to 1997

I do not uphold Mr S’ complaint.

Dominic Harris

Pensions Ombudsman 23 February 2024

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