Deloitte Uk Pension Scheme · CAS-60778-N6P9

CAS-60778-N6P9

Ombudsman’s Determination Applicant Mr N

Scheme Deloitte UK Pension Scheme (the Scheme)

Respondents D&T Pension Trustees Limited (the Trustee)

Outcome

Complaint summary

Background information, including submissions from the parties The sequence of events is not in dispute, so I have only set out the main points. I acknowledge there were other exchanges of information between all the parties.

On 1 April 1981, Mr N became an active member of the Scheme.

On 8 August 1986, Mr N left pensionable employment and became a deferred member of the Scheme.

On 15 April 2014, Mr N received a benefit statement showing his estimated benefits in the Scheme if he retired at age 65. The information showed:-

• Pension was £7,048.44.

• Lump Sum was £31,372.28. 1 CAS-60778-N6P9 • Reduced Pension was £4,995.28.

• The estimated rate of inflation used to calculate the benefits was 2%.

On 14 November 2018, Mr N received a benefit statement showing his estimated benefits in the Scheme if he retired at age 65. The information showed:-

• Pension was £6,971.88.

• Lump Sum was £33,646.73.

• Reduced Pension was £5,047.01.

On 6 March 2020, Mr N received a benefit illustration estimating his benefits in the Scheme, accounting for actuarial factors, if he retired at 65. The information showed:-

• Pension was £6,991.61.

• Lump Sum was £33,719.26.

• Reduced Pension was £5,057.89.

On 9 April 2020, the Trustee contacted Mr N and confirmed that it had made an error when calculating his pension options. Following a reassessment of his pension benefits, Mr N’s Lump Sum was valued at £18,851.50.

On 3 May 2020, Mr N submitted his complaint under stage one of the Scheme’s Internal Dispute Resolution Procedure (IDRP). He said:-

• He was given incorrect information relating to his Lump Sum, based upon which, he made irreversible lifestyle commitments.

• As far back as 2014 he had been advised that he should expect a Lump Sum of over £31,000. In 2018 and 2020 he was advised this would be approximately £33,500.

• Based on the consistent projections, he returned the retirement election forms, advised his clients to find a new accountant and let his professional qualifications lapse.

• It was a shock to receive a letter informing him that the basis of calculating the figures have been incorrectly applied.

• The revised figure was £18,851.50 which was £14,750.00 less than he had expected.

• Given his age and irreversible business decisions, he had no means to replace the lost funds.

On 30 June 2020, the Trustee responded to Mr N under stage one of the Scheme’s IDRP. It said:- 2 CAS-60778-N6P9 • The projections in the incorrect statements were overstated due to a revaluation calculation error. Incorrect statements did not change Mr N’s entitlement under the Scheme Rules.

• The mistakes were made in non-legally binding statements.

• The Trustee could only pay benefits in accordance with the Scheme Rules.

• Mr N had received accurate benefit statements on 17 June 1992, 8 December 1993, and 25 September 1998.

• It offered a payment of £500 in recognition of the distress and inconvenience he had experienced.

On 24 July 2020, Mr N requested that his complaint be reconsidered under stage two of the Scheme’s IDRP. He said:-

• It was reasonable for him to have relied on the incorrect benefit statements that were sent to him. The benefit statements did not make it clear that the numbers given could be so far out as to be totally meaningless.

• He had made the life changing decision to wind down his accountancy practice from 2019 in reliance on the sums set out in the inaccurate statements.

• It was unfair to expect him to compare statements from between 22 and 28 years prior to more recent ones when he naturally expected a significant increase after some 20 years.

• He had based the decision to wind down his accountancy practice solely on the information he had available to him.

On 9 September 2020, the Trustee responded under stage two of the Scheme’s IDRP. It said:-

• It acknowledged and apologised for the incorrect statements it had sent Mr N.

• It was only able to pay the benefits that he was entitled to under the Scheme Rules.

• Since Mr N was receiving the benefits to which he was entitled, nothing further could be paid to him for financial damages.

• It had also considered whether Mr N was owed any compensation for non- financial injustice. It had considered three questions:-

1. Had there been negligent misstatement.

2. Was it reasonable for Mr N to rely on the misstatement.

3. Was the loss he had claimed, a direct result of his reliance on the misstatement. 3 CAS-60778-N6P9 • While the incorrect statements were materially wrong, it was stated that the numbers were estimates and subject to change.

• He had received accurate benefit statements on 17 June 1992, 8 December 1993, and 25 September 1998. It considered it reasonable to have expected Mr N to have kept these benefit statements and questioned the discrepancy in the figures.

• The incorrect benefits statements were also materially different. For example, the Lump Sum in the 2014 statement was £31,372.00 whereas the 2018 statement was £33,646.00.

• Mr N had stated a financial loss of £5,000 per month or £60,000 for the year. The reduction to his Lump Sum was between £12,000 and £14,000. It seemed likely that his decision to wind down his business in 2019 was also because of other external factors.

• Given Mr N’s financial background it believed he had other savings which influenced his decision to close his business.

• It maintained its offer of £500 but without any admission of liability.

Mr N’s position

The reason he had closed his accountancy practice only one year prior to his date of retirement was because of the tax-free implications of his lump sum. The tax-free sum he had expected to receive of £33,500.00 would have left him in a similar financial situation to having continued in practice for a further year.

The accurate statements from 1992 and 1998 did not contain information related to his Lump Sum and were not relevant information which affected him.

By April 2020, the accountancy practice was no longer an asset of any significant value as his clients had already made alternative arrangements by then.

The Trustee’s position

The incorrect statements specifically stated that the figures contained within them were either not guaranteed or subject to change.

The Trustee was bound to pay the correct benefits in accordance with the Scheme’s Trust Deed and Rules.

It was reasonable to assume that an accountant would make some further prudent provision for his retirement.

It noted that Mr N’s Lump Sum was approximately £14,000 less than that estimated in the incorrect statements. Given his career, it was unlikely that the amount was sufficiently large as to make a material difference to the timing of his decision to wind down his accountancy practice.

4 CAS-60778-N6P9 As an accountant Mr N should have a good understanding of financial matters and an eye for details. This would include him understanding that the figures provided were not guaranteed.

It maintained its offer of £500 as redress for the distress and inconvenience Mr N may have suffered.

Adjudicator’s Opinion

The Adjudicator stated that a complaint of negligent misstatement must be based upon an inaccurate statement, usually called a ‘representation’. That representation was usually made by spoken or written words, but it could have also been made by conduct. The representation must have been a statement of past or present fact or, in some circumstances, of the law. It must also have been clear and unequivocal.

The representation must have been made by a person who owed a duty of care to the applicant and must have been something that could not have been made by someone exercising reasonable care. The representation must have been relied upon by the applicant and it must have been reasonable for them to do so, in the circumstances.

The applicant must also be in a worse position than they would have been in if the representation had not been made and the cause of the applicant’s worse position must be the representation. The loss caused by the representation must have been reasonably foreseeable.

The loss caused had to be of a kind within the scope of the duty of care that was owed to the applicant. If these facts are satisfied, the aim would be to put the applicant into the position they would have been had the incorrect representation not been made.

Where a negligent misstatement has been made, financial compensation may be payable for the loss suffered by the applicant.

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The representations in the benefit illustration were made by people who owed a relevant duty of care to Mr N and that the information supplied had come within the extent of their duties towards Mr N.

For a claim of negligent misstatement to be successful, Mr N must have reasonably relied on the misstatement and the claimed loss must have been as a direct result of the misstatement.

The Adjudicator considered that there had been a negligent misstatement, and that Mr N had experienced a loss of expectation as a result. It was clarified that the negligent misstatement occurred on 6 March 2020, when Mr N was provided with a benefit illustration and not at any point before that. This was because each statement received prior to 6 March 2020, was an estimate and it was not considered reasonable to rely solely on the information contained within them. This did not excuse any misinformation that had occurred within each incorrect benefit statement but they would not have constituted negligent misstatement.

The Adjudicator concluded that Mr N made the decision to begin closing his accountancy practice in 2019, following the pension estimate he had received on 14 November 2018. The event of negligent misstatement occurred on 6 March 2020, but the financial decision made by Mr N predated that event. So, the negligent misstatement was not the direct cause of the alleged financial loss.

The pension estimate dated 14 November 2018 contained information warning Mr N that the figures provided were not guaranteed and that they were subject to change. It was not reasonable to make financial decisions based solely on estimates and there was no evidence of Mr N making this decision in conjunction with any other information.

While negligent misstatement had occurred, the Adjudicator did not attribute the cause of the alleged loss directly to the negligent misstatement and was of the view that the Trustee should not pay the inflated figures stated on 6 March 2020.

Mr N had been misinformed about the Lump Sum he would receive when he retired. However, in the Adjudicator’s opinion, as Mr N should not have made financial decisions based on the estimates, the Trustee was not liable to pay the inflated amount in respect of misinformation.

The Adjudicator also considered whether the incorrect information constituted maladministration which had resulted in any non-financial injustice, such as distress and inconvenience.

The Trustee had provided Mr N with a poor level of service because:-

• It provided Mr N inaccurate information for several years. 6 CAS-60778-N6P9 • The information supplied on 6 March 2020 was a negligent misstatement.

• It was unreasonable to expect Mr N to have kept statements dating as far back as 1998 and that he would compare these to information received nearly 25 years later.

• It was unfair and dismissive to suggest that Mr N’s annual earnings would have meant he had significant savings and that these savings meant he could wind down his accountancy practice without consideration of the information provided.

• The quality of responses and explanations were not satisfactory, nor did the Trustee acknowledge the impact the incorrect information may have had on Mr N. In addition, the Trustee failed to accept liability for the misinformation despite clear maladministration.

The Trustee’s consistently inaccurate information and poor quality of responses would have caused Mr N serious distress and inconvenience, so, in the Adjudicator’s view, an award of £1,000 would be in keeping with The Pensions Omudsman’s guidance on non-financial injustice.

Mr N did not accept the Adjudicator’s Opinion, and, in response, he reiterated his previous position and provided the following further comments. In summary he said:-

• He understood that it was not considered reasonable for him to rely upon the pension estimate letter dated 14 November 2018 because the letter “warned” him that the figures provided were not guaranteed and that they were subject to change.

• The benefit options provided in the letter stated that the benefit options at 65 were produced using three specific criteria.

1. The Scheme’s current actuarial factors

2. Current statutory revaluation order

3. An estimated future rate of inflation of 0%

• If the amounts in the letter had been widely different, then he would have had cause for query however this was not the case and the statements remained fairly consistent over an extended period of time. Mr N stated that the estimates provided on 15 April 2014 and 14 November 2018, in substance, had all the weight of a benefits illustration, and that it constituted negligent misstatement.

I have considered the additional points made by Mr N, but they do not change the outcome, I agree with the Adjudicator’s Opinion.

7 CAS-60778-N6P9 Ombudsman’s decision

8 CAS-60778-N6P9 I uphold the complaint in part.

Directions

Anthony Arter CBE

Deputy Pensions Ombudsman 20 May 2024

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