The Pensions Ombudsman (TPO) has upheld a complaint concerning a dispute over retirement benefits, after finding that the trustee of the TPS Benefits Scheme failed to apply an appropriate uplift to a member’s pension when it was taken after his normal retirement age.

Professor N, the complainant, was a Plan 60-plus member, which meant he had the right to retire from age 60 with no reduction to his benefits, but could also continue in the scheme after age 60.

In 2019, he received an annual benefits statement letter from the scheme administrator, Buck Consultants, after his 60th birthday, informing him that he had enhanced retirement rights. If he did not wish to retire at this time, he was not required to take any action.

In 2020, Professor N wrote to the scheme administrator asking why his pension had not increased after he deferred taking it for two years.

He noted that if he had retired at 60, he would have received about £68,000 in payments, which he had assumed would be reflected in a higher future pension.

He spoke to the employer, TUV SUD Limited, to whom his employment was transferred in the 1990s from the Principal Civil Service Pension Scheme, which confirmed that the only increases applied were due to inflation, meaning those missed payments were effectively lost and not compensated for later.

The scheme administrator explained to Professor N that while members could retire from age 60 without any reduction, the scheme’s official normal retirement age was 65.

It said the early retirement option was most valuable at 60 and lost value if deferred, since the unpaid pension between 60 and 65 was not redistributed into future payments. Only inflationary increases were applied, and any actuarial uplift would only apply after age 65.

The next day, Professor N wrote to TUV SUD acknowledging the administrator’s response.
He noted that it confirmed his understanding that deferring past 60 provided no uplift until after 65 and expressed frustration that this had not been made clear earlier.

He estimated the decision had cost him around £40,000 and suggested that other members should be warned of this issue.

TUV SUD shared Professor N’s correspondence with the trustee, to which it responded that while members could retire from age 60 without penalty, this was optional, and no late retirement uplift applied if the pension was deferred.

The trustee agreed the issue should be better communicated to other members, but said there was no rule allowing pensions to be backdated once deferred.

Despite this, Professor N formally requested that his pension be activated retrospectively from age 60, and the scheme administrator agreed to present his request to the trustee board for consideration.

The administrator told Professor N that the trustee board had decided it couldn’t pay him a pension backdated for two years, and after taking legal and actuarial advice, it concluded the scheme rules did not allow it.

The trustee also said that granting a backdated payment or uplift would legally count as an augmentation of benefits, which would require both the employer’s consent and an extra financial contribution, and therefore could not be done.

Professor N made a complaint to the scheme under its Internal Dispute Resolution Procedure (IDRP), but the stage one decision maker decided not to uphold the complaint that he had been misled with regard to his option to take unreduced retirement benefits from age 60.

He then appealed this decision, and the trustee responded to Professor N under stage two of the scheme’s IDRP and did not uphold his complaint, and the complaint was then referred to TPO.

Deputy Pensions Ombudsman, Camilla Barry, upheld Professor N’s complaint, finding that the trustee was obliged to provide an uplift (or compensation, if no uplift is payable under the scheme rules) in accordance with the Pension Schemes Act 1993 and the Preservation of Benefit Regulations.

This uplift ensures that the value of Professor N’s benefits at age 62 equals what they would have been at age 60.

Barry also found that the communication sent to Professor N, which stated “if you do not want to retire at this time, you need take no action", was misleading, as it failed to inform him that delaying retirement beyond age 60 would reduce his benefits.

The trustee was ordered to recalculate and pay Professor N’s pension entitlement with an actuarial uplift and pay any shortfall in pension payments since age 62 with interest at the Bank of England base rate plus 1 per cent.

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