TPO proposes lead case approach in Boots dispute
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The Pensions Ombudsman is proposing to use a lead case to determine a series of internal disputes over retirement age between the Boots Pension Scheme trustees and its members.
The Pharmacists’ Defence Association took the complaints to the Pensions Ombudsman last year, alleging that the trustees changed the scheme rules on the day a £4.8bn buy-in with Legal & General was announced to make unreduced pensions from age 60 a discretionary benefit, rather than a right. PDA also wrote to the Pensions Regulator.
The PDA previously said the rule change only came to light only at stage 2 of IDRPs filed by its members. It said the old rules gave members the right to a full pension from age 60, while under the new scheme rules, this would only apply from age 65.
The ombudsman has now proposed a 'lead case' approach, whereby the determination in a single complaint will inform the outcome of the other complaints about the same issue.
If a lead case approach is taken, TPO will need to decide on an individual case that best represents the issues being contested by the various members. The trustees would then need to apply the determination in their IDRP complaints. mallowstreet understands there could be well over 100 member complaints.
A spokesperson for TPO said: “We are currently in discussions with the relevant parties and are proposing to take a ‘lead case’ approach in respect of this dispute, due to the number of members potentially affected by the issue.”
The spokesperson added: “Lead cases are an efficient way of dealing with a significant volume of complaints of a similar nature caused by the same incident. They can be accelerated through our processes to final Determination, providing clarity for all parties as early as possible.”
The Pharmacists’ Defence Association took the complaints to the Pensions Ombudsman last year, alleging that the trustees changed the scheme rules on the day a £4.8bn buy-in with Legal & General was announced to make unreduced pensions from age 60 a discretionary benefit, rather than a right. PDA also wrote to the Pensions Regulator.
The PDA previously said the rule change only came to light only at stage 2 of IDRPs filed by its members. It said the old rules gave members the right to a full pension from age 60, while under the new scheme rules, this would only apply from age 65.
The ombudsman has now proposed a 'lead case' approach, whereby the determination in a single complaint will inform the outcome of the other complaints about the same issue.
If a lead case approach is taken, TPO will need to decide on an individual case that best represents the issues being contested by the various members. The trustees would then need to apply the determination in their IDRP complaints. mallowstreet understands there could be well over 100 member complaints.
A spokesperson for TPO said: “We are currently in discussions with the relevant parties and are proposing to take a ‘lead case’ approach in respect of this dispute, due to the number of members potentially affected by the issue.”
The spokesperson added: “Lead cases are an efficient way of dealing with a significant volume of complaints of a similar nature caused by the same incident. They can be accelerated through our processes to final Determination, providing clarity for all parties as early as possible.”
Would higher liabilities scupper the buy-in?
If the ombudsman finds in favour of the trustees, depending on the facts he could nonetheless decide that there was maladministration in how communication was handled, and potentially impose member compensation for non-financial injustice, said Amy Davies, a professional support lawyer at Burges Salmon.
If TPO finds in favour of the scheme members, this could increase the cost of the agreed buy-in to the scheme and employer.
Davies said in general in cases where benefits turn out to be more generous than what was agreed with the insurer, the scheme will be liable for the additional amount.
“This means that, where there are insufficient assets in the scheme to meet the additional liabilities, the employer will have to fund the shortfall,” and “in some cases an insurer will agree to adjust the benefits provided under an annuity contract on payment of the additional premium needed to cover them”, she explained.
Legal & General did not comment on whether an additional premium would be due, or if the buy-in is now on hold as requested by the PDA.
A spokesperson stressed that the insurer “has no input over the rules of the pension scheme”.
The Boots Pension Scheme, PDA and TPR did not comment.
