Pensions sharing on divorce and recent Pension Ombudsman’s ruling on failing to re-invest funds in a timely manner

21 October 2009

Summary

Section 34(1) of the Welfare Reform and Pensions Act 1999 (the Act) sets a time limit called the 'implementation period' when pension credits are being transferred in or out of a scheme. Scheme administrators have four months in which to implement the transfer. The Pensions Ombudsman (Ombudsman) has recently ruled that he is prepared to find that maladministration has happened if the transfer is not effected in a timely manner, even if the four month implementation period time limit has not expired.

Facts

Mr and Mrs Boughton divorced and the court issued a consent order, which incorporated a pension-sharing order amounting to 61.13% of the cash equivalent transfer value (CETV) of Mr Boughton's scheme benefits, were to be transferred to Mrs Boughton. The scheme trustees received the consent order and Punter Southall (PS), the scheme administrator and actuary proceeded to process it. The implementation period time limit commenced after this point.

At the same time as the transfer was initiated started, PS experienced a number of internal personnel difficulties within its company due to a significant number of its staff being on holiday at the time of the transfer and due to cover for staff leaving the firm for new posts.

Mrs Boughton was entitled to 61.13% of Mr Boughton’s CETV at the time the order was implemented.  However, she claimed that there was unnecessary delay amounting to maladministration for which Mrs Boughton sought compensation. PS defended its position by stating that it had effected the transfer within the four month implementation period.  Mrs Boughton maintained her view that although the transfer was executed within this period, there were unnecessary delays caused by PS which led her to experience a significant financial loss due to changes in stock market values.  If the transfer had been effected earlier, Mrs Boughton would not have experienced the losses to the value of the CETV caused by market fluctuations.

PS apologised for not handling the administrative aspects of the transfer in an efficient manner and offered a “good will” payment of £100 on a without prejudice basis. However, PS denied further liability. The company reiterated that it had kept within the four month period allowed by statute and so was not liable for the shortfall that Mrs Boughton’s funds had experienced because it had taken PS longer to process the transfer than had been anticipated. This compensation was rejected and Mrs Boughton took her case to the Pensions Ombudsman.

Pensions Ombudsman’s decision

The Ombudsman upheld Mrs Boughton’s complaint and found PS was guilty of maladministration. This was despite the fact that PS had kept well within the four month implementation period. The Ombudsman stated that a period of 15 working days to calculate a CETV and notify the member of its amount was reasonable. As a consequence of his analysis, he made an order which compensated Mrs Boughton for a proportion of her losses, based on the hypothetical date the Ombudsman estimated that a more efficient approach by PS would have led to the transfer being effected.

Comment

This is not the first time that the Ombudsman has found an administrator or trustee liable for maladministration, despite the party concerned having complied with statutory time limits. This case is an untimely reminder to administrators and trustees that the Ombudsman will not allow staff being on holiday or personnel changes to serve as a defence for timely handling of transfer requests.