The Pensions Ombudsman (TPO) has upheld a complaint against Capital Cranfield Trustees and Olivetti UK Limited, highlighting the case as an "important lesson" for schemes about the importance of properly documenting benefits promised on transfers in and on mergers.

The case concerned a pension scheme member, Mr H, who transferred to the Olivetti UK Limited Pension and Life Assurance Scheme, with promises that his benefits would "mirror" those from his previous scheme.

Mirror benefits, including increases, were initially provided to Mr H, although no steps were taken to explicitly document these.

The trustees then decided to stop payment of these increases after taking advice from counsel, believing that the lack of documentation meant they had no power to pay them.

However, TPO found that there had been maladministration and breach of law by the employer, as it failed to properly document and maintain Mr H's contractual entitlements for almost 18 years after promising to mirror his previous scheme benefits.

In addition to this, it found that the employer, on discovering the failure, sought to avoid those commitments in breach of contract.

TPO also concluded the trustee was in breach of trust by failing to administer the scheme in accordance with the relevant scheme rules, including its own transfer-in provisions, although it confirmed that there was no maladministration on the part of the trustee, as it took and followed legal advice.

TPO said the case was "noteworthy" for a number of reasons, highlighting it as an "important lesson" for pension schemes about the importance of properly documenting benefits promised on transfers in and on scheme mergers.

In particular, it pointed out that, "unusually", the ombudsman found that the documentation issued to Mr H at the time of transfer, and the actions of the parties, were sufficiently clear to give rise to a continuing contractual obligation.

It also explained that the employer could not avoid liability by relying on a limitation defence, because there was a continuing breach of contract, and limitation does not apply to an order for specific performance.

Whilst no formal amendment was made to the scheme rules, TPO found that the benefits were granted under the ‘transfer in rule’, allowing the member to enforce this right directly against the trustees without a limitation defence.

Based on its findings, TPO upheld the complaint in favour of Mr H and directed the respondents to pay back payments with interest to Mr H to address historical underpayments.

It also said that the employer must ensure future pension increases are calculated correctly, and ordered the employer to pay £1,000 compensation for serious distress and inconvenience.

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