Admin errors lead to costly TPO remedies

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Two recent Pensions Ombudsman determinations highlight the pressure on administrators as well as the financial risk from errors, with one pension fund and one admin provider set to pay substantial sums to put two claimants right in separate cases.

Loss of partner was followed by loss of expected pension 

The London Pensions Fund Authority may have to pay as much as £34,000 in total pension payments, plus interest on the omitted payments so far and £2,000 for the “severe level of distress and inconvenience” caused. This is because the Pensions Ombudsman has deemed a case of maladministration sufficiently serious to override LPFA’s scheme rules and award a spouse’s pension to a deceased member’s unmarried partner who would not otherwise be entitled to one. 

When the scheme member, Mr N, was terminally ill, he phoned LPFA to ask if his unmarried partner would receive a spouse’s pension and was reassured that Ms E would qualify. On Mr N's death, however, LPFA told Ms E that she would not be paid any pension as her partner’s accrual related to membership before 2008, when only married partners were entitled to a spouse’s pension. 

Ombudsman Dominic Harris would have none of it, however. Based on witness statements, he said Mr N would have married Ms E to secure her financial future had he been given the correct information by LPFA. Citing the similar case of Catchpole v Trustees of the Alitalia Airlines Pension Scheme from 2010, Harris decided to override LPFA’s rules, relying on the legal concept of estoppel by representation. 

LPFA did not disclose whether it plans to appeal the decision. A spokesperson said: “We acknowledge the determination from the Pensions Ombudsman and apologise for the inconvenience caused to Mrs E. We value the feedback received and are committed to implementing measures to prevent similar situations from arising in the future.” 

Administrator should have queried a contradictory form 

Maladministration was also found in a separate case, where a member of the Royal Mail Statutory Pension Scheme had filled in a pensions options form wrongly, signing two contradicting options: full pension, and requesting a transfer pack.  

Pensions administrator Capita did not contact Mr E to query the contradictory form and started paying a full pension based on one of the options chosen. Mr E, however, wanted a lump sum and reduced pension instead. He contacted Capita when he realised his error, but the Cabinet Office, which manages the scheme, did now allow him to amend his option. 

Deputy pensions ombudsman Anthony Arter said Capita should have contacted Mr E based on his vague form. He therefore ordered that Mr E must be allowed to take his preferred option, meaning Capita must pay the lump sum and reduced pension, as well as interest for a period. In addition, it is liable for a tax charge of more than £10,000. Capita and the Cabinet Office were also ordered to pay £250 each to Mr E for the distress and inconvenience caused to him. 

Capita objected to the imposed remedy, saying it was difficult to implement and inequitable in relation to the unauthorised payment charge, but the ombudsman dismissed both arguments. 

Technology must be balanced with human touch 

The two cases point to the risk that seemingly small mistakes in the administration process can lead to significant costs.  
The pressure the sector is currently experiencing could potentially mean such mistakes are generally more likely to happen, but what is more, a technological shift in administration can, in some cases, lead to unintended consequences. 

In the push for efficiency and cost reduction, the risk of automation overshadowing the critical judgment of experienced administrators is real, says Daniel Taylor, client director at Trafalgar House Pensions Administration. The digital transformation in the sector has changed the nature of administrators’ work, moving from manual processes to a strategic, analytical approach, he notes. 
“While this reliance on technology and process optimisation has significantly improved efficiency, it has introduced a new challenge. Errors that arise now are often more complex, linked to automated systems' or workflows’ inability to interpret contradictory or obscure member requests and inputs,” he says.  
Addressing these issues requires a nuanced understanding and a human touch, balancing technological advancements with the critical, interpretative skills of experienced administrators, he argues. 
Administrators have for some time been working on resource intensive projects like guaranteed minimum pension equalisation, pension dashboards preparation and implementing age discrimination remedies among others, leaving little time for training. 
The prospect of more pay for working on extra projects detracts from the time available for professional development, says Taylor. At the same time, the heightened competition for experienced admin staff has shifted the emphasis away from formal qualifications towards practical experience, so that administrators might be less incentivised to pursue further study in their own time.

However, change is coming, he says. 

“A recent trend towards stabilisation in the pensions admin job market is emerging, with a growing number of administrators seeking employers who prioritise traditional work values, including a strong focus on professional development and wellness,” believes Taylor, saying this could be the first signs of a market reset. 
“The hope is that this recalibration will allow administrators the time and resources they need to engage in meaningful professional development, ensuring their skills remain sharp and relevant in a challenging and evolving industry,” he adds.  
Has there been an increase in pensions administration errors? 

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