Newsletters come into focus in TPO decision
Pardon the Interruption
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The Pensions Ombudsman has determined that the Teachers’ Pension Scheme acted with “reasonable diligence by relying on the newsletters” to find out about the marital status of a member, even though TPS itself later decided to take a different approach. The ruling potentially raises questions over the use of newsletters, and how seriously members can or should take them.
In a recent case about Teachers’ overpaying a widow’s pension, Mrs S said she was unaware her remarriage meant she could no longer receive her pension. Information about the need to tell the scheme of any remarriage was contained in scheme newsletters, but the pensioner, who remarried in 2004, said she had discarded these newsletters unread.
Deputy ombudsman Anthony Arter disagreed and decided that it was unlikely that Mrs S had discarded all of the newsletters unread, even though she was honest when she promptly made TPS aware of her remarriage in the course of a verification exercise in 2016, and despite Arter saying he thinks she would have done the same if asked in 2004.
“I find, on the balance of probabilities, she did read one or more of the newsletters sent to her,” he determined. The finding means Mrs S cannot claim to have acted in good faith or rely on the change of situation defence.
In the end, the complaint by Mrs S against recovery of overpayments was nonetheless partly upheld, because of Teachers’ approach to recouping the large sum.
Should schemes rely on newsletters to make members aware of key information?
The case could raise questions about whether schemes can rely on newsletters alone for members to find out about rules and requirements that have considerable consequences for the individual, and to inform the scheme in turn.
TPS itself changed its procedures in 2014, having apparently found that a number of spouses had not told the scheme about their remarriage. It now annually requires those in receipt of certain spouses’ pensions to declare that they are not married or cohabiting.
Arter himself said: “It might be argued that by relying only on the newsletters as a means of ensuring that Teachers’ Pensions was notified of remarriage or cohabitation it was not acting with reasonable diligence.”
However, he added that it was “common practice” for occupational pension schemes to “keep in touch” with pensioners through newsletters and provide them with information about the scheme and their benefits.
“In the absence of evidence that the system is not working (which Teachers’ Pensions must have had by 2014), it may be reasonable to rely on the newsletters and to proceed on the assumption that members will read them. I find that... Teachers’ Pensions was acting with reasonable diligence by relying on the newsletters,” he wrote.
This finding – that a scheme can rely on newsletters to disseminate and collect crucial information even if it later decides to change its approach in light of new evidence – implies newsletters should be taken seriously by members.
When does a newsletter matter?
At the same time, however, it raises questions about how TPO views newsletters, as it could be seen as a departure from the stance in a 2006 ruling about discretionary inflation increases on pre-97 pensions, for members of the NRG Group Pension Scheme.
In that case, TPO found that Mr Inman could not rely on a scheme booklet stating that pensions would be increased annually by 3%, as it also contained statements saying that the trust deed and rules provide the legal basis for the scheme.
Former pensions ombudsman David Laverick wrote: "The booklet is intended to be only a summary and a guide in general terms to the scheme’s benefits and administrative provisions. Its provisions do not override the Scheme Deed and Rules.”
Similar scheme booklets, flyers or newsletters have also been cited by pensioners of other schemes, including Sotheby’s, whose pensioners said the scheme explicitly stated that pensions would be increased and even provided illustrative examples of this.
Although members are held by TPO to read a scheme newsletter like an important document as in the overpayments case, should they at the same time assume that the newsletter might not be complete – or even completely accurate – given the indexation ruling?
The fact that member newsletters normally reference the scheme rules does matter, finds Lesley Browning, a partner at law firm Norton Rose Fulbright.
“In any member’s booklet it will always refer to the rules as [the document that] actually governs the scheme,” she says.
What TPO said about inflation increases in 2006 is right, she agrees, “because it’s settled law that the formal documents will govern the scheme, not a newsletter or update”.
There is also a difference between newsletters talking about overpayments as opposed to pension indexation, Browning believes.
“Repayment is something a member can readily understand, whereas if a newsletter talks about inflation-proofing of pensions it is a very high-level summary of how the rules work,” she says.
What do you think – are we confusing members about the importance (or not) of newsletters?
