TPO partly upholds complaints against British Council on deferred revaluation rate

The Pensions Ombudsman has partly upheld a number of complaints relating to the annual revaluation rate the Central Bureau for Educational Visits and Exchanges Pension Scheme uses for deferred members.

In six determinations published on TPO’s website, the Deputy Pensions Ombudsman, Karen Johnston, has ruled that both the trustees of the scheme and the British Council should pay the members £500 each “in recognition of the serious level of distress and inconvenience the misrepresentation will have caused”. However, Johnston ruled that there was no estoppel in relation to the cases.

The cases relate to the annual rate of revaluation for deferred members, as there had been a discrepancy between how deferred pensions were revalued in practice and the provisions of the scheme rules.

In practice this had been set and paid at 5 per cent, but this was never set out in the scheme rules. Despite this, there was multiple communications sent to the members over the years specifying that the rate would increase by 5 per cent per annum until a members’ normal retirement date.

The discrepancy came to light in 2011 when the British Council was asked to approve new consolidated trust deed rules, which provided for revaluation of deferred benefits at a fixed 5 per cent per annum. However, the British Council did not approve these and, in August 2013, the trustees and British Council sought Counsel’s opinion on the rate of revaluation of deferred benefits.

Counsel’s opinion concluded that the available documentation did not support the view that British Council had made a valid amendment to the scheme rules so as to introduce a fixed 5 per cent revaluation rate. Counsel also considered that there was no conclusive evidence that British Council had ever decided to go beyond the statutory minimum level of revaluation.

Following this, the rules of the scheme were amended by a deed, dated 7 July 2015, which made the following provisions in relation to deferred benefits: “The pension shall then be increased before payment in accordance with the revaluation laws.”

As a result, members were advised of Counsel’s Opinion in March 2015 and provided with revised deferred benefit statements. Several complained they had suffered financial detriment because of this due to actions and decisions they made when they thought the rate would be 5 per cent.

However, TPO ruled that there is no grounds for estoppel in either of the complaints, as Johnston does not believe that there is a direct link that the actions taken by the members were entirely based on the understanding that the deferred rate would be set at 5 per cent.

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