Rothesay Life Pension Plan · CAS-73501-X3S8

CAS-73501-X3S8

Ombudsman’s Determination Applicant Mr E

Scheme Rothesay Life Pension Plan (the Plan)

Respondent Rothesay Life (Rothesay)

Outcome

Complaint summary

Background information, including submissions from the parties Mr E was a member of the GEC 1972 Plan from October 1996 to February 2002. Telent was Mr E’s employer (the Company). His normal retirement age (NRA) is age 55.

On 30 September 2020, Mr E’s independent financial adviser (IFA), requested information from the Plan’s administrators, Equiniti, regarding ill health retirement options and a CETV. Mr E was approaching his 49th birthday in October 2020.

On 15 October 2020, Equiniti provided the requested information to the IFA. The CETV was £108,451.10 and was guaranteed for three months. It also provided the relevant medical authority form (the Form) for Mr E to complete in order to release his medical information.

Mr E subsequently provided the completed Form to Equiniti, which was received by it on 10 November 2020. In support of his application, Mr E provided sick notes that had been given to the Company.

On 18 November 2020, the Company told Mr E that it would refer his case to the Plan’s medical adviser (MA) which it did on 20 November 2020. The MA requested

1 CAS-73501-X3S8 that Mr E provide a specialist’s report in order to assess his case. Mr E said that he provided this report to the MA on 30 November 2020.

Between 26 and 29 January 2021, there were further exchanges between the Company and the IFA regarding further medical evidence.

In February 2021, the Company and the trustees of the GEC 1972 Plan insured the members’ benefits in the GEC 1972 Plan and completed a transfer to Rothesay. Rothesay took responsibility for paying affected members’, including Mr E’s, benefits. The administration of the Plan was transferred to Capita. During the transfer, Rothesay was informed of Mr E’s pending IHRP application.

On 25 February 2021, the IFA chased Rothesay for an update regarding Mr E’s application.

On 1 March 2021, Rothesay apologised to Mr E for the delay caused by the transfer to Rothesay and advised him that it was “keen to assist [him] in resolving this situation as quickly and smoothly as possible.” It also told Mr E that it had not received the report from Mr E that he said he had provided on 30 November 2020. It asked him to complete another consent form for his doctors, because it did not seem to have a previous one on its systems.

Between 6 and 31 March 2021, Mr E and the IFA continued to contact Rothesay for an update. In addition, on 16 March 2021, the IFA requested new ill health pension and CETV quotations from Rothesay. Rothesay confirmed, on 17 March 2021, that it would calculate the requested quotations.

On 4 April 2021, Rothesay apologised for the delay in responding. It acknowledged Mr E had had to “escalate and chase this case multiple times.” It told Mr E that it had now received his further evidence, which had been referred to the MA for review, and should take no longer than 48 hours.

On 13 April 2021, Mr E was told by Rothesay that his IHRP application had been approved. Subsequently, the Scheme Actuary reviewed Mr E’s retirement factors as he was below his NRA.

On 26 April 2021, the IFA chased Rothesay for an update, to which he received no response.

Between 4 and 17 May 2021, Mr E chased Rothesay for an update. He told it that he would be escalating his complaint to the relevant regulatory bodies, including The Pensions Ombudsman (TPO).

On 4 May 2021, Mr E raised a formal complaint with Rothesay under its complaint procedure. He raised the following issues:

• He was unhappy with the delay in providing him with IHRP benefit options.

2 CAS-73501-X3S8 • He expected the CETV quotation received in November 2020, to still be valid, as it was not his fault that Rothesay had taken so long. He indicated that he never wanted his benefits to transfer to Rothesay and he just wanted to transfer his benefits out of the Plan.

On 17 May 2021, Capita acknowledged his complaint and confirmed that the calculations would be processed as quickly as possible. It also told him that “an ill health pension would seriously be worth considering as it means he would get a pension immediately when it would normally be at age 55.”

In an email of the same date, Capita told Rothesay that the IFA’s initial request in September 2020 appeared to have been for an IHRP and CETV quotation. The CETV quotation was subsequently provided to the IFA on 15 October 2020 and the IFA was chasing the IHRP application thereafter.

On 21 May 2021, the Actuary confirmed to Capita and Rothesay the new factors that had been applied to the calculation of Mr E’s IHRP benefits. Capita wrote to Mr E on the same day setting out his IHRP benefits and the value of the new CETV. The value of the new CETV was £104,580.79. The IHRP benefit options are set out in the Appendix.

On 27 May 2021, Rothesay provided Mr E with a response to his complaint that said in summary:-

• Mr E provided his medical consent on 1 March 2021. He subsequently provided supporting evidence on 10 March and 15 March 2021.

• The IFA was chasing the progress of the IHRP application. It did not appear to have received Mr E’s transfer request in November 2020. The November 2020 CETV quotation was no longer valid.

• The ill health process could sometimes take longer than expected while medical evidence was gathered, reviewed and put to the MA for approval.

• It apologised that it had taken longer than Mr E would have expected.

• It acknowledged Mr E had chased it several times. However, the delay was due to the fact that Mr E was below NRA and additional factors needed to be provided by the Actuary.

• Mr E’s IHRP was approved on 13 April 2021. It received information from its Actuary on 26 April 2021, but this was not actioned until 20 May 2021. It apologised for the delays Mr E had experienced.

• On that basis, it upheld Mr E’s complaint. It confirmed that it would backdate Mr E’s IHRP benefits to 30 March 2021.

3 CAS-73501-X3S8 On 6 June 2021, Mr E raised further issues:-

• Rothesay had offered him an IHRP with an unrealistic life expectancy, of at least 20 years. It would now “effectively prohibit him in re-investing [his] accumulated pension pot to maximise its gain in the limited time [he] has left…”

• He wanted Rothesay to change his life expectancy to “normal”.

• He wanted a full or partial pension re-investment transfer.

• What he had been offered did not help him in any positive way. It had made his financial situation worse.

On 9 June 2021, Rothesay responded to Mr E and said in summary:-

• As part of the agreement with the trustees of the previous plan, Rothesay undertook to guarantee generous ill health terms, subject to medical underwriting. In Mr E’s case, it was not applying any early retirement factors, even though his pension was to commence 15 years prior to his NRA. This also allowed for immediate payment, although the earliest date was normally NRA.

• Regarding his CETV against the retirement lump sum quoted, although, the lump sum may have looked smaller than if he took 25% of his CETV, he should take into account that he would only be sacrificing 12.5% of his pension to get his lump sum rather than 25%.

• 12.5% was the maximum percentage given the commutation factor for his early retirement.

• His CETV had been calculated using its standard CETV basis which took into account the average lifetime expectancy across the GEC 1972 Plan membership and made no specific allowance for his health status. He had therefore not been disadvantaged in transfer terms.

• While CETV quotations were valid for three months, there was no cost for providing further CETVs after that date. This was contrary to what Mr E understood as he had indicated in one of the telephone calls that there would be a cost.

• He should be aware that values could go up and down based on market factors at the time of the quotation being issued and it did not provide re-investment transfers.

• It suggested that Mr E seek financial advice. Consequently, it did not uphold the complaint. It believed it had followed its standard process and the options provided to him had not been disadvantaged due to his health.

4 CAS-73501-X3S8 In submissions with his complaint to TPO, Mr E said in summary:-

• He was told by Rothesay on the telephone that the life expectancy used in the calculation of the CETV was 89. It failed to provide this figure in writing.

• He will not be able to request a transfer as his IFA will not proceed with it. This is due to fees payable for financial advice, which he cannot afford.

• He does not need the pension now. He realistically needs it to provide for the future. This is because he suffers from a degenerating condition and considers quality verses quantity of life as key.

• He also needs the flexibility that a transfer would offer him with regards to paying for care costs when these are required.

• Rothesay is doing everything it can to “retain this as an act of theft using every loophole in the current system which is not appropriate to [his] situation and [his] degenerating condition.”

• He wants to invest his pension in a Self-Invested Pension Plan (SIPP) of his choosing because of the forward flexibility.

In submissions to TPO, Rothesay said in summary:-

• It does not agree that it had delayed the process for Mr N. It inherited an incomplete IHRP application and had to start the process from the outset.

• It made a conscious decision to use the date of backdating IHRP benefits as 30 March 2021, as this was the date it had received the application from the previous trustees.

• If Mr E is minded to take the ill health pension, “it would not be averse to backdating payments to November 2020 on a goodwill basis.” It did not consider backdating the payments to 10 November 2020 at the time, as this was not raised by Mr E or his IFA.

• The only instance where things would change was if Mr E’s life expectancy was now less than 12 months. He would then qualify for a serious ill health pension where the benefits are different.

Adjudicator’s Opinion Mr E’s complaint was considered by one of our Adjudicators who concluded that further action was required by Rothesay. The Adjudicator’s findings are summarised below:-

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The first delay was due to the transfer of the Plan to Rothesay which took place in February 2021. Also, the Plan’s administration provider changed to Capita. The Adjudicator noted Rothesay informed Mr E of this and apologised for it. It was unfortunate that the transfer of the Plan took place at the same time as his application for an IHRP. However, in the Adjudicator’s view, the timing of the transfer of the Plan was out of Rothesay’s control, therefore it could not be held responsible for the delay.

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Rothesay did not accept the Adjudicator’s opinion and in response, provided its comments. It submits:-

• It disagrees with the recommended award of £500 which seems unreasonable. £500 is a very significant award. While it appreciated it has been difficult for Mr E that has not been due to its fault.

• It disagrees that there was a period of inaction between 26 April to 20 May 2021. That was “the entire period between actions and not a delay.” At most, there was a delay of a few days in that period.

• The entire process was concluded within six weeks from the date of approval. The process of calculation took just 37 working days when factoring in Easter Bank holidays.

• Mr E and the IFA chased a number of times but that does not mean those chasers were justified. They did not have to chase as the work was ongoing.

• It was disappointed to be held responsible for an overall experience that was created by factors beyond its control.

• It was Equiniti who did not process the application in good time between November 2020 and March 2021 and did not receive medical evidence.

• It upheld Mr E’s complaint on the basis that there was delay of a few days which did not warrant an award.

• As a result of always delivering fair outcomes for its customers, it had scrutinised this case carefully and it was satisfied that an apology was sufficient in this instance.

As Mr E and Rothesay did not accept the Adjudicator’s Opinion, the complaint was passed to me to consider. Both parties provided their further comments which do not change the outcome. I agree with the Adjudicator’s Opinion.

8 CAS-73501-X3S8 Ombudsman’s decision

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I partly uphold Mr E’s complaint.

Directions

Anthony Arter

Pensions Ombudsman 22 November 2022

10 CAS-73501-X3S8 Appendix Retirement Options Form dated 21 May 2021, with Mr E’s retirement date of 31 March 2021, showed the following options:

A. Retirement options without PIE:

Option 1 • A pension of £3,213.04 per annum which will be subject to an inflation related LTA%: 5.98% increase. See Note 8 • There is also a Surviving Spouse’s Pension* of £1,606.53 per annum which is payable in the event of your death.

Option 2 • A maximum tax-free cash sum of £18,667.02 plus a reduced pension of £2,800.06 per annum which will be subject to an inflation related increase. See LTA%: 6.95% Notes 2 & 8 • There is also a Surviving Spouse’s Pension* of £1,606.53 per annum which is payable in the event of your death.

Option 3 • A pension of £5,351.31 per annum payable until 31 October 2038, your current State Pension Date, reducing to £1,606.53 per annum thereafter. Pension LTA%: 9.97% payments will be subject to an inflation related increase. See Notes 5 & 8 • There is also a Surviving Spouse’s Pension* of £1,606.53 per annum which is payable in the event of your death.

Option 4 • A maximum tax-free cash sum of £18,667.02 plus a reduced pension of £4,388.65 per annum payable until 31 October 2038, your current State LTA%: 9.91% Pension Date, then reducing to £1,606.53 per annum thereafter. Pension payments will be subject to an inflation related increase. See Notes 2, 5 & 8 • There is also a Surviving Spouse’s Pension* of £1,606.53 per annum which is payable in the event of your death.

11 CAS-73501-X3S8 B. Retirement options with PIE:

Option 5 • A pension of £3,447.40 per annum of which £489.57 per annum will not LTA%: receive any increases during payment. See Notes 8 & 28 6.42% • There is also a Surviving Spouse’s Pension* of £1,723.71 per annum payable in the event of your death of which £244.79 per annum will not receive any increases during payment.

Option 6 • A maximum tax-free cash sum of £18,667.02 plus a reduced pension of LTA%: £3,004.30 per annum of which £426.65 per annum will not receive any 7.33% increases during payment. See Notes 2, 8 & 28 • There is also a Surviving Spouse’s Pension* of £1,723.71 per annum payable in the event of your death of which £244.79 per annum will not receive any increases during payment.

Option 7 • A pension of £5,468.49 per annum, of which £542.23 per annum will not LTA%: receive any increases during payment, payable until 31 October 2038, your 10.19% current State Pension Date. At State Pension Date your pension will reduce to £1,723.71 per annum thereafter, of which £244.79 per annum will not receive any increases during payment. See Notes 5, 8 & 28 • There is also a Surviving Spouse’s Pension* of £1,723.71 per annum payable in the event of your death of which £244.79 per annum will not receive any increases during payment.

Option 8 • A maximum tax free cash sum of £18,667.02 and a reduced pension of LTA%: £4,505.83 per annum, of which £465.77 per annum will not receive any 10.13% increases during payment, payable until 31 October 2038, your current State Pension Date. At State Pension Date your pension will reduce to £1,723.71 per annum thereafter, of which £244.79 per annum will not receive any increases during payment. See Notes 2, 5, 8 & 28 • There is also a Surviving Spouse’s Pension* of £1,723..71 per annum payable in the event of your death of which £244.79 per annum will not receive any increases during payment.

Option 9 • You have the option of deferring payment of your retirement benefits until a later date. Retirement benefits must be taken no later than Age 75

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