What is a reasonable request for evidence before settling benefits?

by John Wilson   •  
Blog

The trustees / administrators of most pension schemes require members to provide evidence before paying out benefits. Also, scheme rules will usually state that trustees can withhold benefits if the evidence is not forthcoming.

In a recent case[1], the Pensions Ombudsman had to consider whether or not an administrator’s member verification process for settling benefits constituted maladministration. The Ombudsman’s conclusion will reassure administrators but, given the events of the past 15 months, perhaps there are wider lessons.

Due diligence

In more detail, around September 2019, the member applied for the payment of her pension benefits, in advance of her 65th birthday. On receipt of her application, the scheme administrator requested proof of the member’s date of birth (DoB) in the form of a birth certificate or passport, along with a certified copy of her marriage certificate and her husband’s birth certificate. This is a conventional request in the pensions industry as part of due diligence before paying out benefits from scheme assets.

In this case, however, the member submitted only a copy of her paper driving licence as evidence of her DoB and a marriage certificate that was not properly certified.

Pragmatic solution

The administrator continued to chase the member for a number of months regarding the documents that they has requested and the member was informed that her application could not be processed without this documentation. After further delays, however, the administrator chose to accept the evidence provided by the member as being sufficient proof of DoB. The administrator did not have to do this, but opted to find a pragmatic solution to the impasse.

On 30 April 2020, the member’s pension was finally put into payment with arrears.

Not unreasonable

The member was still not satisfied and complained to the Ombudsman that the evidence she had submitted should have been accepted from the start and the delay in paying benefits was maladministration.

The Ombudsman determined, in line with previous determinations,  that it was common industry practice for scheme administrators to request documentation, such as that requested by the administrator in this case. Although there was no standard or prescribed approach for the documents that could be accepted, the Ombudsman found that the forms of evidence the administrator was willing to accept pursuant to the deferred benefits claim form was not unreasonable. Also, in circumstances where a spouse may become entitled to the member’s pension upon death, it was not unreasonable for the administrator to request evidence of marriage and the spouse’s DoB too.

The Ombudsman concluded that the delay in setting up the member’s retirement benefits arose due to her unwillingness to provide evidence in the form clearly requested. So, the complaint was dismissed.

Case closed?

Well, yes, for now. The determination is instructive from the perspective of it providing confirmation that a standard industry practice for member identification remains reasonable. Also, the case shows how (if scheme rules permit) administrators can be flexible where standard processes are not working.

However, as a final thought, and to go back to the question posed in the heading to this article, it will be interesting to see, in future, whether changes in technology and the processes used by administrators during ‘lockdown’ change views, including the Ombudsman’s, on ‘what is a reasonable request for evidence before settling benefits?’.

[1] Mrs N (CAS-41310-M3X4)

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