Challenging Decisions by Pension Trustees

Posted:15th August 2018

Many pensions provide benefits which are only payable at the discretion of the Pension Scheme Trustees. Examples include whether benefits can be paid earlier than the normal retirement age, whether benefits should be reduced, and how death benefits should be distributed. Often the decision made by Trustees when someone passes away is uncontroversial, and means a payment is made to a family member or a partner, perhaps in accordance with a declaration of wishes the pension scheme member made in their lifetime. Sometimes, though, the Trustees don’t make the decision which the survivors expect. The Trustees will typically say that they have a full discretion to pay or not to pay, or to pay a different person, and that this is the end of the story. While this is true, scheme Trustees still need to act within the law. What can be done to challenge a decision made by Trustees in the exercise of their discretionary powers?

The Scheme rules may provide a right of appeal, and this will normally be the first avenue of dispute. If the appeal isn’t successful, the next step may be the Pensions Ombudsman. The Ombudsman is tasked to investigate maladmininstration by pension Trustees, and this includes the right to investigate discretionary decisions. It’s important to understand that the Ombudsman won’t comment on whether the decision was in itself right or not. What the Ombudsman does is look at whether the actions taken by the Scheme were within the law and whether the Trustees took the correct factors into account in making their decision. For example, if the Trustees have made a decision based on a company policy which was out of date, that might suggest that the decision wasn’t lawfully made. Or, if the Trustees didn’t take into account information provided to them, that might be another reason. The Ombudsman will usually send the decision back to the Trustees and ask them to think again.

Recently the case of Mr. G. gave an example of how the Ombudsman treats these situations. Mr. G. had died, and his partner applied for death benefits. His scheme rules said that payments could be made to someone who was “a dependant” and “an eligible recipient”. Mr. G’s partner satisfied these rules, but the scheme administrator decided, without giving any reason, that no payment should be made to her.

The Ombudsman decided that the fact that there were no reasons given for the decision in itself suggested that there was “no supportable reason” for it. The scheme administrator had to reconsider and to communicate the new decision within 21 days (fully documented this time).

Particularly in the case of death benefits, it can be emotionally painful and financially damaging if a benefit is withheld which a family member believed was due. Because these payments are discretionary, it can never be guaranteed that a decision can be overturned – but that isn’t to say that there is no possibility of challenge. If you find yourself in this situation, we can advise and help with an appeal or a reference to the Ombudsman