Wikipedia has no entry for “Improvisational Pension Scheme Administration Standards”

Neil Copeland

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Wikipedia has no entry for “Improvisational Pension Scheme Administration Standards”. I know because I’ve just checked, to save you the trouble. Improvisational Theatre – yes!  Improvisational Comedy – yes! Improvisational Pension Scheme Administration Standards – No!

An element of the recent Pension Ombudsman decision in the case of Mr Philippe Pollet v Optimum Capital Limited  (“OCL”), together with some earlier Ombudsman decisions, suggests that Wikipedia is in need of such an entry.

Mr Pollet had complained he had lost out because OCL, as principal employer and trustee of the Optimum Internal Pension Plan had failed to process his request to transfer to a Legal and General self-invested personal pension. Note they had completely failed to process his request, not just been a bit dilatory in doing so. Reading the judgement it would appear that In July 2013 Mr Pollett and Legal & General (Mr Pollett’s SIPP provider) signed the form that OCL required to have completed to apply for a transfer. From the information available this appears to be the first unambiguous indication from Mr Pollet that he wished to take his transfer value. Legal & General also returned a copy of the application form that Mr Pollett had completed for the SIPP to OCL together with a request for the transfer payment to be made on 9 July 2013.

Clearly a bit of a slam dunk for the Ombudsman as no one, and I mean no one, is going to argue that taking two years plus from receipt of a valid application to actually settling the transfer constitutes anything other than maladministration, in the absence of any extraordinary, and I mean extraordinary, mitigating circumstances.

No doubt, if you are a trustee reading this, you will be patting yourself on the back, content that you will never, ever, in any conceivable circumstances, take over two years to make a transfer payment. Indeed you have a lovely checklist from your administrator/lawyer/consultant (delete as applicable) setting out the legion of administrative statutory deadlines you need to comply with as trustee. Transfer values, let me see, there it is – under Section 99 2 (b)  of the Pensions Scheme Act 1993 you have 6 months from the date of application to a Defined Contribution Scheme to complete the transfer value process. Easy peasy, even an incompetent administrator couldn’t take 6 months to process a DC transfer, could they?

But wait – here comes the Ombudsman, at paragraph 48 of his decision, with an improvised pension scheme administration standard;

“Legal & General sent the completed discharge form to OCL on 9 July 2013. My view is that one month from that date would have been reasonable time to disinvest Mr Pollett’s holdings with HBOS and BIL (on or about 23 July 2013) and then make the payment to Legal & General (on or about 1 August 2013).”

This is not the first Ombudsman decision to stress that meeting a statutory timescale will not necessarily be good enough to avoid a finding of maladministration. Indeed in an earlier case in  2011 the Deputy Ombudsman held that pension scheme administrators should take no more than five working days to raise and issue a transfer value cheque once they have all the necessary transfer documents. No doubt if you are a trustee reading this, you may be feeling slightly less comfortable than you were a few short sentences ago.

This point has also previously arisen in Ombudsman judgements in the context of implementation of pension sharing orders, the payment of AVCs to an insurer, and the provision of DB transfer value quotations. Some of these cases have indicated what timescales would have been appropriate in the particular case being considered, so we now have a suite of Improvisational Pension Scheme Administration Standards. You can probably throw your administrative statutory deadline checklist out now as its been rendered a bit pointless by the Ombudsman.

Trustees need reminded of this point, (that meeting a statutory timescale will not necessarily be good enough to avoid a finding of maladministration),  from time to time and should review the service level standards set out in their administration agreements to ensure that they  do not leave themselves exposed to the Ombudsman’s view on what constitutes maladministration . Trustees should be aware that the Ombudsman is likely to apply the same principles to other areas of administration which he may not have had to consider. Yet.

Unlike Improvisational Comedy, Improvisational Pension Scheme Administration Standards are no laughing matter.

Neil Copeland

Post by Neil Copeland

Director, pensions consultant and adviser to trustees and employers on all aspects of work based pension schemes.