TPO upholds complaint against Phoenix

The Pensions Ombudsman (TPO) has upheld a complaint against Phoenix, after misinformation led to the complainant having a lower Guaranteed Minimum Pension (GMP) recorded than he was entitled to.

‘Mr D’ complained that mistakes made by either the trustees or Phoenix during the transfer of his pension rights from the Midlands Import-Export Services Retirement Benefits Scheme (the scheme) to the NPI Section 32 Buy Out Policy (the policy) in 1998 had resulted in Phoenix recording the lower GMP figure.

This led Phoenix to permit a transfer of his pension rights in the policy to Aviva and, as a result, Mr D had received benefits that were “significantly lower” than those which would have been available from the scheme had he not transferred out.

TPO has now upheld the complaint against Phoenix only, ordering the firm to carry out a loss calculation to ascertain whether the transfer value of £65,815.74 paid from the policy to Aviva would have been adequate to secure the GMP of £,157.17 per annum at Mr D’s normal retirement date (NRD) of 19 February 2013.

If the transfer value was insufficient to cover the cost of this GMP, then the shortfall amount will be used to secure an additional annuity with Aviva from Mr D’s NRD on the same basis as his existing Aviva annuity.

If the transfer value was insufficient to cover the GMP of £4,157.17 per annum, Phoenix will also pay to Mr D a lump sum, plus simple interest, equal to the outstanding instalments of his pension.

Mr D had transferred his deferred pension benefits, including GMP rights, from the Speedo Scheme to the scheme in November 1992.

In July 1998, London & Manchester Pensions Ltd, on behalf of the scheme trustees, completed a trustees application form in order to transfer benefits available from the scheme to the policy.

Part B of this form showed the total transfer value for Mr D as £31,032.34, and confirmed that the transfer payment represented “all the member’s benefits under the scheme”.

Part C showed that a GMP for Mr D’s date of leaving of £637 per annum, including a post 6 April 1988 GMP of £619.32 per annum, which had been accrued during a period of contracted out service from 1988 to 1996.

Transfer-in details on the form (part D) showed a transfer value of £31,032.24, including a £10,341.24 for pension rights transferred into the scheme, of which £9,199 was for contracted out service.

The form also confirmed that the transferred in benefits had not been in the form of added years, but rather a “fixed PUP of GMP + MP A/C”.

The schedule issued by Phoenix confirmed that a premium of £31,032.24 was received by the policy on 14 July 1998, and also guaranteed that a GMP of £1,757.53 per annum would be paid from Mr D’s SPA, of which £1,708.80 per annum would increase at 3 per cent per annum compound during payment.

However, in September 2012, Mr D's independent financial adviser sent Phoenix a transfer value quotation which was received from London & Manchester in May 1997, showing a transfer value of £24,857.82, including £13,817 for GMP rights.

This quote also included the same GMP information as shown in a March 1998 transfer value quotation from London & Manchester, and led Mr D to query the transferred in GMP liability held in the policy, as he was unsure if it had been accounted for on the form.

In December of 2012, Mr D also notified Phoenix of his intention to transfer his pension rights, and was subsequently informed that he could only proceed if the current transfer value covered the value of his GMP liability held in the policy.

Phoenix subsequently wrote to HMRC on 11 January 2013 to enquire about the transferred in GMP, notifying both Mr D and his IFA of what it had done.

HMRC informed Phoenix that Mr D’s GMP in the Scheme did not include any GMP transferred in from his previous pension arrangements, which was consistent with all other official notification of Mr D’s GMP previously received from HMRC by Phoenix.

Having received confirmation that the GMP figures held on record for Mr D were the same, Phoenix transferred his pension rights in the policy to Aviva in February 2013.

The transfer value available of £65,815.74 was used to purchase a level single life annuity of £2,850 per annum for Mr D.

HMRC later verbally clarified that Mr D had also accrued GMP in the Speedo Scheme, but in August 2014 Phoenix informed Mr D that HMRC had confirmed it was not liable for the GMP accrued in the Speedo Scheme.

However, Mr D stated that HMRC had told him there was an error during the transfer of his pension rights from the Speedo Scheme, and it had not been notified of the transfer of his GMP into the scheme by the Speedo Scheme administrators.

In November 2014, after amending its records, HMRC provided Phoenix with revised GMP details, showing that Phoenix was still responsible for paying the GMP which Mr D had transferred from the Speedo Scheme into the policy.

Phoenix argued that London & Manchester had failed to make it clear on the form that the GMP did not include the transferred in GMP from the Speedo Scheme, or provide explicit figures for this GMP.

It stated that this was “misleading” and had resulted in it providing Mr D with the policy that only guaranteed payment of the GMP which he accrued in the scheme.

The firm also emphasised that it had accepted the details “in good faith”, as well as confirming the details with HMRC, and argued that as such, it would be “harsh” to now make it responsible for paying the transferred in GMP, caused to mistakes made by the Speedo Scheme or London & Manchester.

Phoenix added that it no longer had any funds in the policy to cover the GMP liability, and that there is no open-ended commitment for it to take on such liabilities for Mr D.

Phoenix also noted that Mr had pressed for the transfer at the time and complained about delays which resulted from the firm trying to confirm the correct details with HMRC.

It stated: "Had Mr D not pressed for the transfer at the time, and used our letter as an opportunity to take up the issue with HMRC and Speedo/the trustees, an appropriate remedy could and should have then been agreed/sought with them…"

However, the ombdusman, Anthony Arter, agreed with the adjudicator that the design of the form in question made it difficult for London & Manchester to provide details of Mr D’s transferred in benefits, including the additional GMP, in a transparent way.

Furthermore, Arter stated that as London & Manchester had provided the dates of the contracted out service for the GMP accrued by Mr D in the scheme, Phoenix should “reasonable have deduced” that the GMP details did not include the additional GMP available from the transferred in benefits, as mentioned in section D of the form.

Arter stated: "In my view, the information supplied on the form was enough for Phoenix to make further enquiries about the transferred in GMP with the trustees via London & Manchester, if necessary, and its failure to do so represented maladministration on the part of Phoenix.”

However, he did agree that mistakes were made by both London & Manchester and the Speedo Scheme administrators in notifying HMRC of the transfer of Mr D’s GMP rights to other schemes, rendering Phoenix’s investigation with HMRC “worthless”.

He disagreed however, with the firms statement that HMRC was the “arbiter” of GMP, emphasising that HMRC's ability to provide accurate information is dependent on the information it receives from providers.

Arter also noted that the “main thrust” of Phoenix’s argument was that it could only know in hindsight that the trustees had transferred the GMP liability to the policy.

However, he argued that regulation 5(1) of the Occupational Pension Schemes (Discharge of Liability) Regulations 1997, meant that the policy was established on terms which stipulated Phoenix would have to provide a minimum of the revalued GMP, and although not explicitly stated, make good any shortfall, “regardless of when it became aware of Mr D’s full GMP liability”.

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