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04 June 2018

Never too late to change?

The Pensions Ombudsman has decided that the trustee of a defined benefit occupational pension scheme could switch from RPI to CPI-based revaluation six years after the changes to the statutory revaluation index.

The scheme rules, which were executed in 1992, provided for revaluation on a deferred pension of “five per cent per annum compound or by such lesser amount as is specified by the Secretary of State”.

Following the changes to the statutory revaluation method in 2011, the trustee continued to apply RPI. In 2017, the trustee informed members by way of an announcement that revaluation on a deferred pension would be in line with CPI from 1 January 2011 onwards and RPI for any earlier period of deferment.

Mr W, who became a deferred member when he left service in 2007, complained that the announcement was contrary to the information he had received previously, that his benefits would be revalued in line with RPI between his leaving date and retirement. He claimed that he was entitled to revaluation in line with RPI up to the announcement in 2017.

The Pensions Ombudsman dismissed his complaint and determined that the trustee was obliged to administer the scheme in line with the scheme rules and, where an error had occurred, to amend that error. Therefore, the trustee was obliged to apply CPI revaluation, despite the information that had been provided to members previously (which was overridden by the scheme rules).

The decision is a reminder that trustees are required to administer the scheme in accordance with the rules and that the rules are key in determining the correct increases and revaluation to be applied.

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