TPO partially upholds complaint against Atkins Pension Trustee

The Pensions Ombudsman (TPO) has partially upheld a complaint against Atkins Pension Trustee following a dispute about a member’s pension increases.

Atkins Pension Trustee Limited was instructed that it had a period of 28 days with which to pay £1,000 to Mr K for the serious distress and inconvenience caused, recalculate his benefits and pay interest in respect of prior underpayments.

The ombudsman found that Atkins Pension Trustee Limited, the trustee of the Atkins Pension Plan, had retrospectively applied a rule in error when calculating Mr K’s first pension increase.

This rule, part of a trust deed amendment from 1997, stated that a member who had joined the plan before April 1996, as Mr K had, would see their pensionable payment increase by 5 per cent each 1st April if they had not reached state pension age, or at 5 per cent of the part of their pension that exceeded their guaranteed minimum pension (GMP) if they had attained state pension age.

The rule continued: “The first such increase shall without affecting the liability of the fund prior to 1st July 1979 be deemed to have been made on 1st April 1979 except that if the pension has been in payment for less than 12 months the first increase shall be reduced proportionately.”

In 2015, Mr K was informed by HMRC that his state pension was changing and, when queried in November of that year, the government body told him that his GMP entitlement from the plan had been increased.

The member then contacted scheme administrators, finding that his own calculations did not match theirs and noting that the scheme rules did not explicitly outline a definition of the word ‘proportionately’.

The disparity in calculations was due to the fact that Mr K’s calculations were based on days in payment, whereas the scheme’s were based on complete months.

Mr K argued that this meant the calculations did not treat members equally as some members were being overpaid or underpaid depending on when they were born.

Following a review of the complaint, the trustee discovered an error in September 2019, which affected Mr K’s benefits, with initial investigations having incorrectly concluded that the Trust Deed had validly introduced the rule in relation to service prior to the trust deed.

This was contrary to the restriction under the plan’s power of amendment and statutory restrictions under section 67 of the Pensions Act 1995 and meant that, as the rule could not be applied retrospectively, the requirement to proportion the first year’s pension increase should not have applied to Mr K’s first pension increase.

The trustee then confirmed that it would recalculate Mr K’s pension on the basis that a full annual increase should have been paid on 1 April 2002 and said that interest would also be paid at the rate of 1 per cent simple, over the base rate, in respect of past underpayments, while it also apologised for the error and offered £500 in recognition of the distress and inconvenience caused.

However, Mr K pursued the complaint to TPO, which found that the trustee’s offer to recalculate would be “adequate redress”, but also stated that the trustee’s award to Mr K should be increased to £1,000 due to the “unacceptable amount of time” it had taken to recognise its mistake.

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