Nhs Pension Scheme · CAS-39827-R8Q6

CAS-39827-R8Q6

Ombudsman’s Determination Applicant Ms N

Scheme NHS Pension Scheme (the Scheme)

Respondents NHS BSA (NHS BSA)

University Hospitals Birmingham NHS Foundation Trust (UHB)

Outcome

Complaint summary

Background information, including submissions from the parties

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• It had been unaware of the email sent by NHS BSA when Mrs N returned to service in 2013. If it had been aware, it would not have arranged to calculate her Added Years contributions and back-date them to 2013.

• It would have to refund her contributions and would take the necessary action so that they could be added to her April or May salary.

• It apologised to Mrs N for this situation.

• On returning to work for the NHS in 2013, she had asked if she could resume paying into her Added Years contract, and this request had been granted.

• However, in 2016, on requesting a retirement estimate, she discovered

2 CAS-39827-R8Q6 that contributions for the Added Years contract had not been deducted.

• As a result of her subsequent enquiry, UHB had calculated the monthly cost of paying both current contributions and the additional amount to cover the missed Added Years contributions, backdated to August 2013.

• She had then paid a lump sum in respect of the missed Added Years contributions and had resumed monthly contributions to her Added Years contract.

• In 2019 she was informed that these additional Added Years contributions could not be included in her pension calculation as she had not been entitled to resume the Added Years contract in 2013.

• She had been incorrectly informed that she was entitled to resume the Added Years contract.

• UHB missed the 2013 email from NHS BSA which confirmed that she was not entitled to resume Added Years contributions.

• She was “deeply unhappy” with the situation and had she known the correct position she would have considered investing these contributions into another scheme, or would have saved into a building society where she could have earned interest.

• She wanted the matter resolved by having the Added Years contributions reflected in her pension.

• UHB was not the Scheme Administrator when Mrs N resumed service in August 2013.

• However, it had checked the historical records and had found a copy of the email sent by NHS BSA in 2013 that confirmed her Added Years contract was closed, and no further contributions could be made as Mrs N’s break in service was greater than a year. • As the Added Years contract was between Mrs N and NHS Pensions, it could not comment on what communication, if any, had taken place between the parties regarding the closing of her Added Years contract.

• However, on application, Mrs N would have signed an application form to indicate that she had read and understood the “Increasing Your Benefits” booklet.

• Page 12 of that booklet stated:-

o “If before your chosen end age, you:-

3 CAS-39827-R8Q6  Leave the Scheme for any reason, or

 We agree you can stop your additional contributions, or

 Have breaks in your membership, or

 Your payments stop for any other reason,

You will get only the added years or unreduced lump sum you have paid for at that stage.”

• It was reasonable to conclude that, since Mrs N had signed to say she had read and understood the contents of the booklet, she was aware that a break in membership would mean that she would no longer contribute towards an Added Years contract on her return from any break.

• It acknowledged that Mrs N may not recall the contents of a document that she had read and signed years previously.

• NHS BSA had confirmed the Added Years contract was cancelled and that it would not accept any arrears.

• The only option available was to refund all the Added Years contributions that Mrs N had made since commencing service in 2013.

• Employers were bound by the Employer Charter to provide Scheme members with information about the Scheme, their individual benefits and other basic information.

• An employer should establish relevant information about any member joining their service, including their eligibility to continue paying Additional Voluntary Contributions (AVCs) or Added Years.

• It had informed Mrs N’s employer when she returned to service in 2013 that her Added Years contract had been terminated and she was no longer eligible to contribute to any Added Years contract.

• It had informed her employer, but it was not also its normal process to inform members about such matters. Further, it would not be aware that the employer had not informed Mrs N of the cancellation of her Added Years contract and the fact that she could not resume contributions. 4 CAS-39827-R8Q6 • Mrs N had confirmed that she had read and understood the “Increasing Your Benefits” booklet which explained that a break in membership in excess of one year would mean she could only receive credit for the Added Years she had paid for before the break in service and could not resume contributions.

• It had provided Mrs N with sufficient information at the outset for her to be aware of the Regulations applicable to resuming Added Years following a break in employment.

• Mrs N should direct her complaint about not being informed she could not resume her Added Years contract, to UHB, as the employer was responsible for this issue.

• Regarding the employer’s calculation, and collection, of backdated contributions for the Added Years contract, this was also the employer’s responsibility and Mrs N should direct her complaint to UHB.

• Mrs N should also direct her complaint about financial loss to UHB, as it was her employer who deducted the contributions directly from her wages.

• It had offered her the opportunity to purchase Additional Pension so that any loss could be mitigated. This option remained open to her.

• She was explicitly informed that she could resume the Added Years contract.

• She continued to maintain that she had made a financial loss which NHS BSA should make good.

• Further, she said that NHS BSA should compensate her for the distress and inconvenience she had suffered. • In respect of the offer to purchase Additional Pension, she had informed her employer that she did not want to take any action in respect of the monies she had paid into the Added Years contract, nor accept a refund, until she had sought legal advice.

• She did not understand what was meant by purchasing Additional Pension.

• She asked for the complaint to be considered under IDRP Stage Two.

• The purchase of Added Years must be assessed in line with the Scheme Regulations. Regulation L4(2), which it quoted in the letter, stipulated that the contract could not be resumed because more than a year had elapsed between leaving service in 2010 and returning in 2013.

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• Mrs N’s employer was responsible for updating her records and it had sent UHB an email in November 2013 asking it not to deduct any contributions in respect of the previous Added Years contract, and to refund any contributions that had been made in error.

• If the employer does collect contributions in error, NHS BSA expects the employer to rectify matters because the employer is responsible for deducting income tax before refunding contributions.

• It had not agreed to the resumption of Added Years contributions or the backdating of contributions to 2013. It was not possible to resume the Added Years contract.

• It did not agree that Mrs N had made an actual financial loss, stating that she had suffered a loss of expectation. This was based on the effect on her pension of contributions which had been incorrectly deducted and the delay in correcting the position.

• It could not pay Mrs N a benefit to which she had no entitlement. Allowing the purchase of further Added Years would be to disregard the Scheme Regulations, and would place Mrs N in a better position than other Scheme members who took a break and did not have contributions deducted in error following a return after a break in excess of 12 months.

• It believed an appropriate response would be to return Mrs N, as near as possible, to the position she would have been in, but for the error. Additional Pension was the direct replacement for the Added Years contract. It would permit Mrs N to use the contributions to buy Additional Pension instead of returning the contributions to her. It contended this would address Mrs N’s concern about investing the money in an alternative scheme had she known it was not possible to resume contributions to the Added Years contract.

• It provided further information about Additional Pension and a calculation showing what Mrs N’s contributions would purchase on top of her standard benefits.

• She was misled by her employer’s pension department as she was informed that she was eligible to restart contributions to her Added Years contract.

• In 2013 she was given incorrect advice by her employer saying that she could 6 CAS-39827-R8Q6 resume contributions to her Added Years contract.

• In 2016, when it discovered no contributions had been collected, her employer and NHS BSA calculated the cost of resuming the Added Years contract and gave her the total cost of these contribution arrears, which she subsequently paid.

• She had suffered a financial loss because of the misinformation. Had she been correctly informed, she would have invested in other saving schemes and would have seen growth on her investment. Alternatively, she would have saved in a building society account, on which she would have received interest.

• She confirmed that the total contributions she had paid to the Added Years contract in error, had been returned to her net of income tax and National Insurance.

• She was very disappointed and had suffered distress and inconvenience in her efforts to have matters put right, for which she sought some compensation.

Adjudicator’s Opinion

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UHB accepted the Adjudicator’s Opinion and paid £500 to Mrs N. However, Mrs N did not accept the Adjudicator’s findings, so the complaint was passed to me to consider. Mrs N provided her further comments in support of her contention that she should receive compensation for the lost opportunity to save or invest elsewhere. While I agree with the Adjudicator’s Opinion in the main, I consider an award of interest is merited. I note the additional points raised by Mrs N, which are set out below:-

• She regularly reviewed her finances and had she not paid into the Added Years contract she would have instead made investments elsewhere. She provided a list of accounts to demonstrate her longstanding savings habit, including:-

o Stocks and shares ISA;

o Investment ISA;

o Cash ISA;

o Pension Share Investments;

o Shares

• She believed she could have earned in excess of 3% per annum on cash savings and maintained that she had made a financial loss.

• She disagreed that NHS BSA was not responsible for the error, contending that it was equally responsible for the error.

• She did not agree that £500 was sufficient to compensate her for the financial losses she had incurred and the extent of her distress and inconvenience in having to pursue the matter for more than two years after her retirement.

Ombudsman’s decision

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Directions

Anthony Arter

Pensions Ombudsman 15 February 2022

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