2005...scheme (cfops) 25 cases solved by mediation 27 hybrid scheme – winding-up – abatement of...

2005Digest of Cases

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Digest of Cases of the Pensions Ombudsman 2005

Office of The Pensions Ombudsman

36 Upper Mount StDublin 2Telephone (01) 647 1650www.pensionsombudsman.ie

Introduction 3

Final Determinations 4

Post-retirement increases 4Case 1 4Case 2 4

Reinstatement of spouse’s pension – arbitrary cut-off date 6

Right of entry to dependants’ scheme 6

Non-payment of a spouse’s pension – wound-up scheme 7

Priorities on the winding-up of a pensionscheme 9

Case 1 9Case 2 10

Defined benefit versus defined contribution scheme 11

Public service scheme – parity – re-grading 12

Application of a market value adjustmentfactor to retirement benefits and allowance for low interest rate to refund of premium 12

Failure by insurance company to correctly setup pension payments – numerous errors bothin amounts of pension paid and taxdeducted. 13

Local Government Superannuation Scheme(LGSS) – pensionability of overtime 15

Constructive dismissal 16

Claim for a refund of ‘overpaid’ contributions 19

Secondment arrangements 21

Member absent and receiving incomecontinuance benefit 23

Construction Federation Operatives PensionScheme (CFOPS) 25

Cases Solved by Mediation 27

Hybrid scheme – winding-up – abatement of DC members 27

Public service scheme – calculation of arrears of contributions – insurability ofemployment 29

Public service scheme – transfer of service – ‘knock for knock’ basis 30

Public service scheme – refusal to accept atransfer value from a funded scheme to a non-funded scheme 30

Public sector scheme – ill-health provisionswhile on preserved benefit – revised date ofaward of pension 31

Public service scheme – notional service –maladministration leading to underpayment 32

Public service scheme – date of actualretirement – AVC – single premium payment 33

AVC – delay in dealing with benefits –falling values 35

O F F I C E O F T H E P E N S I O N S O M B U D S M A N

Contents

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The purpose of this document, which should be read in conjunction with my 2005 AnnualReport, is to draw attention to some of the more interesting complaints that have been dealtwith by my Office during the last year. During 2005 I issued 76 Final Determinations underSection 139 of the Pensions Act and I have included summaries of 17 of these cases below.

In addition, 146 cases were resolved during 2005 by the process of mediation or interventionand I have included summaries of eight of these cases.

I hope that these cases will be of practical benefit to those working in the industry, andparticularly to trustees and others involved in dispute resolution. Copies of these summariesare available on my Office’s website.

Paul KennyPensions Ombudsman

May 2006

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Introduction

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POST-RETIREMENT INCREASES

CASE 1

Background

The complainant retired early from servicein 1996 and started to receive a pensionunder the employer-sponsored private sectorpension scheme.

Up to that time, it had been the employer’spractice to pay pension increases in linewith the rate of salary increases granted toactive serving staff. The complainantunderstood this to be a contractual right, asthis parity arrangement was one of thefeatured benefits in long-standingagreements that existed betweenManagement and the Staff RepresentativeAssociation.

When in 2001, the trustees advised him thatthe rate of pension increase was at theirdiscretion and would not be granted on aparity basis he challenged this, to no avail.

In 2004 he requested and received aDetermination from the scheme trusteesunder the Internal Dispute Resolutionprocedure, which did not uphold hiscomplaint. In July 2004, he submitted acomplaint form to this Office.

Outcome

On investigating this complaint I found thatthe scheme rules gave the trustees thepower to determine the rate at whichpension increases were paid. In myDetermination I was unable to uphold thecomplainant’s view that he had suffered afinancial loss because the recent rates ofpension increase were different from, or lessthan, those previously provided. Under thescheme rules, the retired members did nothave a guaranteed right to parity increases,and the trustees could not be charged with a

claim of maladministration for notproviding such a scale of pension increases.

The question of an agreement that existedbetween the employer and the StaffRepresentative Association to provide morethan the pension scheme rules permittedwas not a matter within my remit, coveredas it was by employment agreements andconditions.

CASE 2

Background

The complainant was a retired member of adefined benefit plan. He claimed that, afterhe joined the company in 1972, a pensionplan was set up for him under which he wasguaranteed an increase to his pension inretirement of 5% p.a. without qualification.The complainant retired in 1992 and a 5%increase was applied to his pension in 1993,1994 and 1995. However, in 1996, withoutnotice and without explanation, thepayments to him were cut back andthereafter restricted by reference to theConsumer Price Index (CPI).

Outcome

There was a great deal of confusion aboutthe setting up of this plan. By way of aSubscriber’s Agreement form the employerwas admitted to the Irish Pensions Trust(IPT) Retirement Benefits Trust with effectfrom 1 May 1973, and installed a scheme tobe governed in accordance with the IPTMaster Trust document dated 15 January1975 and the Deed of Amendment dated 2August 1977. A further Deed of Amendmentand Appointment was made on 14 April1994. However, the special rules for the planwere not finalised until 15 November 1996.


Final Determinations

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Special Rule 8 provided as follows:

“The pension as computed underSpecial Rule 4 of a male member whoattains Normal Pension Date on orafter 1 May 1976 and of a femalemember who attains Normal PensionDate on or after 1 May 1990 and anypension as computed under SpecialRule 7 of a spouse of a Member shallbe increased while in course ofpayment by 5% per annumcompound subject to such increasesnot exceeding the percentage increasein the official cost-of-living since thecommencement of such pensions.”

Pending the agreement of the special rulesthe plan was administered in accordancewith the general rules of the IPT RetirementBenefits Trust and by way of instructionsgiven to the administrators of the plan bythe subscribers. Rule 14.9 of the IPTRetirement Benefit Trust provides for post-retirement increases in line with themaximum increases provided for underRevenue Commissioner rules. These rulescan be summarised as follows:

Discretionary increases may be madeto maximum pensions up to the levelof increases in CPI or similar agreedindex.

Guaranteed increases may be made byusing either of the followingformulae:

(i) Fixed increases of not more than3% p.a. compound (regardless ofCPI levels)

(ii) Increases linked to CPI or otheragreed index.

However, a combination of (i) and (ii)above is not permitted.

Augmentation of existing pensions toput the recipients on a par withcurrent holders of the sameemployment will normally beapproved.

The complainant had argued that, as he hadretired in 1992 under a pension planestablished in 1973, the special rules for theplan, which were only finalised in 1996,could not apply to him. Unfortunately, it isall too common in the pensions industry inIreland that there is an excessive delaybetween the establishment of pension plansand the finalisation of the detailed rules - inthis case the delay was 23 years.

However, the Revenue Commissioners have,over the years, accepted special or detailedrules for a pension plan as being applicablefrom the dates on which they are expressedto apply, the scheme being operated in themeantime in accordance with the detailscommunicated to members. In the currentcase the commencement date was deemedto have been 1 May 1973. In any event,pending the finalisation of these rules, thecomplainant would have been bound by therules of the IPT Retirement Benefits Trustand by Revenue rules, neither of whichwould have allowed for an unqualifiedincrease of 5% p.a. compound without a CPIcap. In addition there was no evidence tosuggest that the employers ever intendedthat the complainant should receive such anincrease on an individual basis. My FinalDetermination was that the complaintshould be disallowed.

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REINSTATEMENT OF SPOUSE’SPENSION – ARBITRARY CUT-OFF DATE

Background

The complainant had been in receipt of aspouse’s pension under the pension scheme,following the death in 1988 of her firsthusband. She remarried in 1990 andacknowledged that, in accordance with thethen pension scheme rules, her spouse’spension would cease on remarriage.

The pension scheme rules were amended in2003 to the effect that spouses whoremarried after 1 January 2003 would nothave payment of their spouse’s pensionterminated.

The complainant had applied unsuccessfullyto the scheme trustees to have the rulechange applied to her and for payment ofher spouse’s pension to re-commence.

Outcome

On examining the scheme rules I found thatthe non-cessation of payment of a spouse’spension applied only in circumstances wherea spouse remarried after 1 January 2003.This being the case, the rule change did notapply to the complainant as her remarriagehad taken place before 1 January 2003.

I was satisfied that the trustees hadcorrectly applied the scheme rules and thatthere was no maladministration on theirpart. In September 2005 I issued a FinalDetermination stating that the complaintcould not be upheld as the complainant wasnot entitled under the scheme rules to haveher spouse’s pension reinstated.

Arbitrary cut-off dates of this kind arecommon. Such dates may be dictated byoutside factors, such as EuropeanDirectives and the dates of their

transposition into Irish law. Sometimes,the dates are set by the end (or even thestart) of negotiations leading to change.Inevitably, they give rise to inequitiesand complainants understandably feelaggrieved. However, I do not have thepower to change the rules of a schemeand there is no remedy for theunfairness in these cases unless itamounts to oppression or unlawfuldiscrimination.

RIGHT OF ENTRY TO DEPENDANTS’SCHEME

Background

The complainant had been employed by theprincipal employer for 14 years when sheagreed to transfer to the employment of anew joint venture company, set up by them.She was assured that the terms andconditions of this employment would be noless favourable than they would be with herprincipal employer and was offered anopportunity to re-join her principalemployer’s service at a later date. Sheavailed of this offer to re-join some threeyears later.

While in the service of the principalemployer, the complainant had not been amember of the dependants’ scheme,operated by them in tandem with theirpension scheme. She had been given a ‘once-off ’ opportunity to join but had notaccepted this. Subsequently membership ofthis scheme was made compulsory for allnew staff joining service.

When the complainant re-joined theprincipal employer’s pay-roll, deductions fordependants’ scheme contributions wereerroneously taken from her salary. This errorwas not discovered until more than threeyears had elapsed. The complainant arguedthat, by virtue of contributing to the


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dependants’ scheme she was entitled to itsbenefits. The trustees disagreed, stating thatshe had not satisfied the entry conditionsand could not benefit from the clerical errorthat led to deductions starting when she re-joined the principal employer’s service.

Outcome

On investigating this complaint Idetermined that the complainant’sentitlement under the scheme was dictatedby the trust deed and rules and not by thefact that contributions had been erroneouslydeducted from her salary.

While a charge of maladministration couldbe levelled against the principal employer for(a) wrongly commencing deductions fordependants’ scheme contributions when thecomplainant re-joined service, and (b) takingthree years to correct this error, I agreedwith the trustees’ determination that theerror did not entitle her to benefits shewould not otherwise have qualified forunder the scheme rules. For this reason Idisallowed her complaint.

NON-PAYMENT OF A SPOUSE’SPENSION – WOUND-UP SCHEME

Background

The complainant was a widow entitled to aspouse’s pension under the pension schemeof which her late husband had been amember.

On retiring, the husband started to receive apension that had a five-year minimumpayment guarantee. In addition, there wasan attaching spouse’s pension, payable fromthe date of his death or, from the end of thefive-year guaranteed period, if later.

Unfortunately the husband died after lessthan a year on pension and so thecomplainant qualified for two benefitsunder the pension scheme:–

(i) payment of the balance of the five-year pension guarantee on herhusband’s pension, and

(ii) a spouse’s pension of £1,194.33(€1,306.18) p.a., payable from the endof the five-year guaranteed period.

The complainant chose to receive thebenefit referred to at (i) above in the form ofan immediate lump sum settlementamount, with the spouse’s pension, referredto at (ii) above, due to become payable fromSeptember 2003.

On contacting the scheme administrators in2003 to request payment of her spouse’spension, the complainant was advised thatthe Irish employer had ceased to trade andthat the pension scheme had been woundup without any provision being made forthe payment of her pension. It wassuggested to her that the payment of thepension was the legal liability of trustees.

The complainant was unsuccessful in herefforts to have the matter resolved andreferred her complaint to this Office inNovember 2004.

Outcome

In the investigation of this complaint Iconsidered the employer, the trustees andthe administrators to be respondents. Noneof these disputed the fact that thecomplainant was entitled to a small pensionunder the pension scheme, yet she had towait two years and go to the trouble ofbringing her complaint to this Office beforeshe received payment.

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The scheme trustees had the responsibilityof ensuring that all members received theirentitlements. In this case the trustees werecompany-nominated individuals. As theywere empowered under the trust to do, theydelegated the administration role, includingthe keeping of the membership recordsunder the scheme to a firm of professionalconsultants. As I understand it, the act ofmaladministration that led to thecomplainant not receiving her pensionentitlement when the scheme was wound-up was done by the consultant company.The parent company in the United Stateswas paid the surplus that existed under thescheme following its winding-up.

Until my Office became involved, none ofthe respondents appeared to be prepared totake responsibility for the problem or tomake any genuine effort to resolve it. Notonly had this elderly complainant beenwaiting since September 2003 to receive hersmall annual pension of €1,306.18, but shehad been given scant consideration and littleassistance by any of the responsible bodies,in her quest for payment. I would considerthat the respondents failed in the duty ofcare which they all had, towards thecomplainant.

I was dismayed by the arrogant andlegalistic approach I encountered from theadministrators, particularly as the act ofmaladministration was done by them, andthat it was abundantly clear that this wasso.

The role of the Pensions Ombudsman is toinvestigate and adjudicate on certain typesof complaint from pension scheme membersand, in so doing, to offer members analternative to going to law. The approach todispute resolution that I have encouraged inthis Office is an informal user-friendly one –aimed at establishing the facts and decidingon a remedy, if applicable. This Office hasgenerally been successful in its efforts toresolve disputes by mediation and the

application of common sense, while beingmindful of the member’s entitlement underthe scheme rules and any overridinglegislation.

I have to state that I found the overlylegalistic stance adopted by theadministrators in this case to be at oddswith this approach and not at all conduciveto solving the problem. Discussions aboutactual responsibility versus legal liabilityonly served to create a tangle where thereshould have been none. The administrator’smain priority seemed to lie in protectingtheir own position in relation toprofessional indemnity insurance cover,despite the blindingly obvious fact that theact of maladministration had beencommitted by them. The complainant wasentitled to her pension under the schemeand the administrators were one of theparties directly involved and responsible forensuring that she received it.

Following the first contact from this Officewith the parent company in the UnitedStates – whose initial approach to theproblem had been to refer the complainantto the consultant – they agreed to fund thebulk of the cost of the complainant’spension, which action effectively resolvedthe problem. (In the end, they paid almost83% of the cost with the administratorspaying the balance). However, it wasunfortunate that such an agreement couldnot have been reached voluntarily at anearlier stage and that the complainant hadto wait almost two years to have herpension secured.

In my Determination I found for thecomplainant and declared that theadministrator’s omission of her record fromthe membership listings and their reluctanceand that of the trustees to voluntarilyresolve the problem were all acts ofmaladministration that gave rise to financialloss to her. I consider that the way in whichthis elderly lady was treated was not only


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discourteous and a breach of the duty ofcare that the respondents should haveexercised in her respect, but an exercise ofalmost cynical cruelty to someone in such avulnerable position. It must have beenabundantly clear that a person in hersituation would be in no position to pursueher entitlements through the Courts; butthat, in essence, is what she was beinginvited to do by the emphasis placed on thelegal liability of trustees as opposed to theanswerability of any person concerned inthe conduct of a pension scheme for an actof maladministration perpetrated by thatperson.

I found it regrettable that I did not havethe power to order a compensatoryaward to this complainant, for I believeshe deserved one as compensation forthe mean-spirited way she was dealtwith under the pension scheme.

In fact, in a case such as this, punitivedamages would not have beeninappropriate. I regret to say that thisis the sort of case which may cause meto review my policy of protecting theanonymity of respondents.

PRIORITIES ON THE WINDING-UP OF APENSION SCHEME

CASE 1

Background

This case was not a complaint, but a disputeof law relating to the distribution of theassets of the pension scheme of which thecomplainant was a member.

The employer’s business went intoliquidation in 1994 but no action was takento wind-up the pension scheme at that time.

On reaching retirement age of 65 in 2002,the complainant set about trying to obtainhis benefit under the scheme. He wasadvised that the trustee, a body corporate,had ceased to exist and that new trusteeswould have to be appointed before matterscould progress. He took steps to have threenew trustees, including himself, appointed,as the insurers involved had a power ofappointment. The scheme was documentedonly by an interim deed. Although adefinitive trust deed and rules had beendrafted, these were never executed.

These new trustees then started to wind upthe scheme, whose assets were held under agroup policy. The insurers suggested twodifferent methods that could be used todetermine the split of the scheme assetsbetween the members. Under the firstmethod, the complainant could receive aproportionately higher share of the fund, ashe had attained retirement age. Under thesecond method, the fund could be dividedamongst the members in proportion to theirbasic transfer value entitlements onwinding-up.

The dispute therefore, related to theproportions in which the available assetswere to be distributed between the eightscheme members and to what precisely werethe protections afforded by the Pensions Actto the complainant, in particular.

Outcome

Following my investigation I was satisfiedthat the ‘relevant employment’, as definedin the Pensions Act, of all participants in thescheme ceased on 27 April 1994 and thatbenefits vested in them under the rules atthat time.

The appropriate action in relation to thepension scheme, following the liquidation ofthe company, would have been to wind it

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up and purchase buyout bonds or pay outtransfer values to other schemes for themembers.

The pension scheme cannot be deemed tohave been wound up, simply because theemployer went into liquidation, eventhough that event might be a trigger forwinding-up in most pension schemes. Nor isit sufficient for the members or trustees todeclare that there was ‘an intention’ towind-up the scheme in 1994 or at any timesince then. For a scheme to be wound-upthe trustees would have to declare theirintention of winding it up, notify themembers of this and arrange for the assetsto be distributed and the trust dissolved.The fact that the Definitive Deed in thiscase had never been executed made it evenmore necessary for the proper formalities tobe observed.

Had the scheme been wound up in 1994, thecomplainant would have had the samepriority over the assets of the scheme as theother members had. However it was notwound up then, nor can it, as was suggestedby certain of the scheme members, be‘considered’ to have been wound up then.

The priorities on winding-up are set outunder the Pensions Act 1990. As a result ofthe statutory order of priorities introducedby the Act, which overrides the provisionsof the trust deed and rules of the scheme(which, in this case, did not exist), there isno discretion available to the trustees in thedistribution of the scheme’s assets. Theseconfer a higher priority on the provision ofbenefits for the complainant, because of thefact that he would be of ‘normalpensionable age’ at the time the scheme wasformally wound up. Persons who havereached that age, even if not actually retired,are accorded the same priority under the Actas pensioners whose benefits are already inpayment.

In my Determination I found that thetrustees had no discretion in the method of

allocating the assets on the winding-up ofthe scheme. The complainant had a priorityclaim under the scheme by virtue of the factthat he had reached ‘normal pensionableage’ before it was wound up, and Iinstructed the trustees to proceed with thewinding-up of the scheme and thedistribution of the assets using the firstmethod referred to above.

CASE 2

Background

I received three identical complaints inrelation to one scheme. This involved thetransfer of members from a scheme inwinding-up to another scheme of the sameemployer. Both schemes were in surplus andthe eventual winding-up yielded a largerefund to the sponsoring employer. It wasdecided not to purchase annuities for thepensioners in this case, which waspermitted under the rules of the scheme,but to transfer their liabilities into thesecond scheme, using the powers providedto do this under Section 48(3) of thePensions Act. The assets transferred wouldnot have been sufficient to purchaseannuities for the pensioners concerned. Thecomplainants maintained that the only waythat they could be sure that their pensionentitlements were secure was through thepurchase of annuities and that they were ata financial risk because this had not beendone.

Outcome

Section 48(3) of the Pensions Act contains aprovision which enables trustees of ascheme in winding-up to make a transfer toanother occupational pension schemewithout the consent of the members. Ibelieve that this section was originallyintended to facilitate transfers in schemes


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whose rules did not contain any transferpower, and where the amendment of therules might prove difficult in winding-up. Ido not believe that they were designed tofacilitate the actions taken by the trustees inthe current situation. However, I could notuphold this complaint because no financialloss had yet been incurred by thecomplainants. In fact, because they rankfirst in order of priority if the second schemewas wound up, the pensioners are moresecure than the active members and deferredbeneficiaries of the second scheme.Although the complainants in question werenot disadvantaged, the members of thereceiving scheme are now in a less secureposition than they were before the transfers.I consider that this was a use of thestatutory, overriding power of transferwhich was never intended. In the instantcase, the waters were further muddied bythe fact that a single individual acted asactuary to the scheme, consultant to thesponsoring employer and representative ofthe corporate trustee in respect of bothschemes – a clear failure by the firmconcerned to identify, let alone deal with, anobvious conflict of interest.

DEFINED BENEFIT VERSUS DEFINEDCONTRIBUTION SCHEME

Background

In 1996 the complainant, a proprietarydirector, instructed his broker to set up andadminister a defined benefit pension schemein his respect, having agreed the cost basiswith him. From 1996 to 2002, the schemewas referred to and dealt with by thebroker/administrator as a defined benefitscheme, with regular actuarial valuationsdone and a rate of contribution paid inaccordance with the actuary’srecommendations.

In October 2002, the administrator advisedthe complainant that his scheme was in facta defined contribution scheme, set up on a‘target benefit’ basis, and not a definedbenefit scheme. The complainant sought anexplanation of how this had come aboutand was most displeased to find himself inthis position and by the manner in whichhis enquiries were handled, culminating inthe resignations of the corporate trusteesand the administrators in July and August2003 respectively.

He referred the complaint to this Office inJune 2004.

Outcome

Following the investigation undertaken bythis Office, it was found that there wasmaladministration on the part of trusteesand administrators in setting up the schemeon a basis that was incorrect, but this hadnot in fact created a financial loss under thepension scheme. While the complainant didnot have the type of scheme he requestedand was given to believe he had, the value ofbenefits under his scheme was not less atthe time the complaint was made than itwould have been if the scheme had been setup as a defined benefit scheme, having beenactuarially reviewed and valued. In light ofthis I could not find in my Determinationthat the complainant had suffered financialloss even though there had beenmaladministration on the part of thetrustees and administrators.

Failure of the trustee/administrator tocarry out instructions is a contractualissue between them and the employerand, unless it results in financial loss tothe member, is not a matter which thisOffice can remedy.

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PUBLIC SERVICE SCHEME – PARITY –RE-GRADING

Background

The complaint in this case related to a claimfor parity with an increase in salary of thepost from which the complainant retiredfrom in 1994. The complainant was a retiredTown Clerk and he contended that the re-grading of the post, effective from 1 January2003, was simply the conclusion ofnegotiations under the Programme forCompetitiveness and Work (PCW) and as suchshould be passed to him under the rules ofpay parity for pensioners.

Outcome

Following an investigation of the matter, Iconcluded that the re-grading of the postwas not an extension of the PCW and thatthe remuneration of Town Clerks underClause 2 (iii) of Annex 1 of the PCW wassettled on 27 February 1998. The increasegranted to Town Clerks with effect from 1 January 2003 related to a separate claimmade under the Better Local Government(BLG) initiative and involved a re-grading ofthe post. Public service pension policygenerally, and the rules of the LocalGovernment Superannuation Scheme,provide that all general pay increases areapplied to pensioners as a matter of course.Special pay increases are also normallyapplicable to pensions subject to specificconditions. One of these conditions is thatthe increase must not have been awarded inconsequence of a substantial restructuringor alteration of duties which, in effect,constitutes a re-grading of the posts orgrades concerned. In this particular case Iwas satisfied that this increase was grantedon the basis of a re-grading of the post. Thecomplaint was therefore disallowed.

APPLICATION OF A MARKET VALUEADJUSTMENT FACTOR TO RETIREMENTBENEFITS AND ALLOWANCE FOR LOWINTEREST RATE TO REFUND OFPREMIUM

This complaint was twofold.

(i) Background

The complainant was a member of apension scheme set up with an insurancecompany and regular annual premiums werepaid to the policy. When his policy reachedmaturity at his 70th birthday, a renewalnotice was issued in error for an additionalannual premium. A delay of over two yearsarose in dealing with the refund and whenthe premium was refunded, interest wasallowed at 2% p.a. for the relevant period.The complainant was not satisfied with theamount of interest offered.

(i) Outcome

I found that the insurance company wasguilty of maladministration and suggestedto them that a more appropriate rate toapply instead of the 2% interest rate wouldbe the increase in CPI for the relevantperiod. The insurance company agreed and aDetermination was issued to this effect.

(ii) Background

The second part of the complaint related tothe application of a market valueadjustment (MVA) factor to thecomplainant’s fund at retirement. Thecomplainant’s policy matured at 5 October2000 but he did not receive anycorrespondence in relation to maturityoptions until 12 September 2002 – almosttwo years later. This was despite a provisionin the policy conditions that contact would


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be made prior to the normal retirement dateto advise of the options available.

It further transpired that all units attachingto the policy had been encashed at thematurity date and held on deposit. Thisaction was taken contrary to the policyconditions which provided that units wouldonly be encashed when all requirements ofthe insurance company had been met. Asthe insurance company had only written tothe complainant two years after thematurity date, the requirements could notpossibly have been met. A value was quotedto the complainant at 23 December 2003made up of the encashment value atOctober 2000 together with interest addedfrom October 2000 to December 2003.

When the insurance company realised theirerror in encashing the units at maturitydate, a letter was issued to the complainanton 23 February 2004 to the effect that theunits had been reinstated. However, anMVA factor of 15% was applied to the fund.The complainant was advised in the letterthat while any MVA factor would not beapplied on retirement at normal retirementage or on death, it would apply to the policygoing forward. Since the complainant hadnow passed his normal retirement age andwas never quoted options at that date hewas not in a position to take benefits atnormal retirement age. The information wasprovided to the complainant three and a halfyears too late.

While it was clear that the policy conditionspermitted the application of an MVA to thefund it was reasonable to expect that, hadthe complainant been made aware of hisoptions at the maturity date of the policy,including the impact of the application of anMVA factor, he would have taken aparticular course of action.

(ii) Outcome

The case was put to the insurance companyand, having reviewed all the issues, it agreedthat an MVA factor should not be applied tothe complainant’s fund.

I issued a Determination that the insurancecompany was guilty of maladministrationand directed it not to apply the MVA factorto the fund.

FAILURE BY INSURANCE COMPANY TOSET UP PENSION PAYMENTSCORRECTLY – NUMEROUS ERRORSBOTH IN AMOUNTS OF PENSION PAIDAND TAX DEDUCTED.

Background

The complainant retired in March 2004 andexpected his pension payments tocommence immediately based on amountsalready quoted and agreed between himselfand the respondent.

From the outset the respondent, which inthis case was an insurance company, set upincorrect monthly pension payments fromMarch 2004 and only after protractedcorrespondence with the complainant’ssolicitor did they agree that the annuity wasincorrect and attempted to rectify thesituation by making back payments. Thiswas compounded by further errors.

It became clear that when the complainantadvised the respondent of his bank details toset up the pension payments, he gave detailsof a fixed term deposit account which couldnot accept regular payments over aprolonged period.

The respondent did not amend its recordswhen advised on 9 November 2004 thatfuture payments should be paid to thecomplainant’s current account. This was the

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case despite reassurance to the contrary tothe complainant’s solicitor in a letter dated23 December 2004. The respondent alsomaintained in its letter to this office of 11March 2005 that the records had beenupdated. This was clearly not the case and,on receiving confirmation from therespondent, it was clear that paymentscontinued to be made to the complainant’sfixed term deposit account from November2004 to April 2005.

The confusion between different bankaccounts exacerbated an already difficultsituation to the point where thecomplainant’s trust in the respondent’sability to deal with his pension wasseriously eroded.

However, the complainant did providedetails of the fixed term deposit account inthe first instance and was subsequentlyadvised by his bank of the difficulties inaccepting electronic transfer payments tothis account. Therefore he had to bear someof the responsibility for the confusionbetween March and October 2004.

The respondent also issued an incorrect P60for 2004 – this was an error in itself, but italso suggests that the respondent did notaccurately transfer the details of thecomplainant’s PPS number from theRetirement Advice form and thereby heldincorrect tax details from the outset. Anydetails of tax credits received from Revenuewould not have matched the incorrect PPSnumber. This may explain the complainant’sinsistence that tax details were provided andthe respondent’s insistence that no taxdetails were received by them. It does nothowever excuse the respondent’s initial errorin the setting up of the complainant’spension payments.

The fundamental administration errorswhich were at the root of this case shouldhave been corrected promptly once the

respondent was made aware that there wasa problem. Proper checks should have beenmade of all the complainant’s details oncethe initial problem arose. Instead thepension payment situation was allowed toget into such a state that the complainantfelt he had no option but to contact hissolicitor and eventually seek this Office’sintervention.

Outcome

The complaint was upheld. The respondentagreed to issue a cheque in respect of thereturned payments from the bank for theperiod November 2004 to April 2005. It hadalready paid a cheque to take into accountthe returned payments from March 2004 toOctober 2004. The respondent altered itsrecords in respect of payments to the correctbank account and paid the correct netamount for June 2005 and committed topaying the correct amounts due in thefuture. It was in a position to repay theoverpaid tax in respect of 2005 to therespondent and to issue a tax certificatewhich was acceptable to Revenue to enablethe complainant to reclaim his tax for 2004.

The complainant had insisted that theliability for the tax rebate for 2004 lay withthe respondent – his attitude was verymuch that they made the mistake indeducting the incorrect amount of tax;therefore they must repay it. However itwas my opinion that only the individualconcerned can claim tax that is owed tohim. (This differs from the position in thecase of an overpayment of benefits, wherethe scheme administrator must recover taxcorrectly deducted on amounts incorrectlypaid.)

The complainant also felt that he shouldreceive some compensation for the amountof frustration and hassle caused by the


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respondent in dealing with the situation.The respondent had offered an ex-gratiapayment. However, the complainant wasnot happy with the amount offered. Mypowers in relation to awarding financialredress are limited to placing the personback into the financial position in which heshould have been at outset. On payment ofthe tax rebate and on issue of the taxcertificate for 2004 this would have beenachieved. Any additional compensationawarded by me would simply take accountof the loss in the value of money. Iconsidered that the ex-gratia paymentoffered by the respondent in thecircumstances was fair and reasonable andexceeded the amount of financial redressthat could have been awarded by me.

LOCAL GOVERNMENTSUPERANNUATION SCHEME (LGSS) –PENSIONABILITY OF OVERTIME

Background

I received complaints during the year from agroup of workers from a local council that,while they were working regular, rosteredand mandatory overtime, they were notbeing allowed to pay their superannuationdeductions on this overtime on a weeklybasis. Instead they had to wait until theyretired when a substantial amount of moneyis taken from their lump sums to pay thesuperannuation owed on these hours.

Outcome

Article 105, Subsection 2 of S.I. No. 455 of1998 – Local Government (Superannuation)(Consolidation) Scheme 1998, provides thatovertime may be included in the calculationof superannuation awards subject to certainconditions. These conditions are laid downin Circular Letter S. 12/91, dated 11

December 1991, as issued by theDepartment of the Environment, Heritageand Local Government. Paragraph 6 of thatCircular states

“Superannuation contributions willbe payable in arrears on all overtimepayments in respect of which aMinisterial direction is given. Suchcontributions should be recovered bythe local authority by retaining theamount due out of the lump sum orgratuity payable to or in respect ofthe officer or employee at the time ofcesser of office or employment.Where there is no lump sum orgratuity the amount due should berecovered by way of periodicdeduction from the pension payableto the officer or employee. Theamount of the periodic deductionshould be equal to the amount of thepension payable in respect of theovertime payments which are takeninto account in calculating thesuperannuation award.”

Following my examination of the complaintI determined that the council had actedcorrectly in accordance with the rules of theLGSS as laid down in Circular S. 12/91, innot deducting superannuation contributionsin respect of regular and recurring overtimeon a current basis and I disallowed thecomplaint. Notwithstanding this I stillexamined the arguments put forward by theDepartment justifying their position and Ipublish these as a useful item of informationfor others who may encounter similarproblems:

Strict conditions must be met beforeovertime payments are reckonable forsuperannuation purposes, i.e. theovertime must be a feature of theemployment, must not be optional,must be of a regular and recurringnature, and must not arise as a resultof work volumes or staff shortages.

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Experience to date suggests thatconditions/contracts of employmentrelating to ‘non-officers’, as they aredescribed, do not generally contain arequirement for overtime to beworked, and the situation on theground would appear to be that theworking of overtime on a regular andrecurring basis evolves over a numberof years. Accordingly, decisions inrelation to whether overtime iscompulsory or optional and, ifcompulsory, the element of samewhich is regular and recurring can, inthe majority of cases, only be madeclose to, or at, retirement. In previousMinisterial appeal cases that involvedthe reckoning of overtime payments,the same issue frequently occurred. Itis also quite common for regular andrecurring overtime to be accompaniedby irregular overtime, e.g. callouts,providing emergency cover, etc.,which could be problematic for theongoing deduction of contributions.

It can occur that, while regular andrecurring overtime may be a featureof a person’s ongoing employment,the position may change due to avariety of factors including,promotion, age, work/life balance,transfer request, physical condition,etc. In such situations, if ongoingcontributions were levied on overtimeearnings paid during earlieremployment, an employee mightreceive no benefit, or a reducedbenefit, if the overtime ceased prior toor during the last three years ofservice.

It is for these reasons that it isdeemed more appropriate todetermine whether overtime isreckonable at retirement, and if so, tocalculate the amount to be includedas part of pensionable pay and levythe relevant contributions on thehistoric earnings.

CONSTRUCTIVE DISMISSAL

Background

The complainant, on enquiring about herright to a deferred pension, was told thatthe employer had advised the schemetrustees that she had left employmentvoluntarily and had no entitlement tobenefit under the scheme. She had workedfor a company for four and a half years fromMay 1991 to December 1995. On 5December 1995, following a proposed re-organisation of the firm, she was presentedwith a new contract which, she claimed,contained elements of the work beingundertaken by the Managing Director andthe Operations Director of the company atthat time. For various reasons thecomplainant was not happy with the newcontract and refused to sign it. She claimsthat she then discussed with the ManagingDirector the reasons why she was unhappywith the contract but was informed thatthere was to be no discussion about it andshe was to sign it or she would no longerhave a job. Following this she claims thatshe was dismissed from the companybecause she refused to sign the new jobspecification, although the company claimsthat she left voluntarily. Following on fromthis the complainant took a case against thecompany to the Employment AppealsTribunal. The case was settled before aruling was given by the Tribunal and thecomplainant received a settlement of£18,000 plus her costs. The complainantmaintained that the settlement amountedto an admission that she had been unfairlydismissed. She claimed that she had left thecompany “through no fault of her own” andshe should therefore be entitled to a deferredpension under the rules of the pensionscheme. The company, on the other hand,claimed that the payment made to thecomplainant was of a modest amount whenconsidering the time the case had taken andwas likely to take, and was made forpractical commercial reasons, including thecompany’s desire to avoid adverse publicity


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due to a possible sale of part of itsoperations.

Outcome

The explanatory booklet for the pensionscheme provided that a member “will beentitled to a deferred pension payable fromage 65 or such earlier date as the trusteesmay permit, in the following circumstances:

(a) if your employment is terminatedthrough no fault of your own (e.g.redundancy);

(b) if you leave for any reason other thanfraud, misconduct or any culpablereason and have completed at leastfive years’ service as a Member.”

Rule 11(b) of the scheme provided for thepayment of a deferred pension –

“in the event of any Member soleaving by reason of his service beingterminated by the Employer for anyreason other than fraud, misconductor any culpable factor on the part ofthe Member, of which the employerwill be the sole judge or if he leaves ofhis own free will having completed atleast five years’ continuous service ...”

At the time the complainant left thecompany she did not have five years’continuous service. The key issue to bedecided, therefore, was whether thecomplainant could be deemed to have leftthe company “by reason of her servicehaving been terminated by the Employer forany reason other than fraud, misconduct orany other culpable factor on the part of themember”.

Effectively the issue to be considered waswhether the complainant could be deemedto have been constructively dismissed by heremployers. In this regard I obtained legal

advice on constructive dismissal law inIreland which I will briefly summarise.Constructive dismissal occurs where anemployee feels that his/her employer hascreated conditions that are so intolerableand unreasonable that he/she feelscompelled to resign. Therefore, it is theemployee who terminates the contract ofemployment; however, such termination isnot voluntary but is forced upon theemployee by the employer’s conduct. Theterm ‘dismissal’ is defined in the UnfairDismissals Act 1977 as includingconstructive dismissal. The relevant part ofthe definition is:

“the termination by the employee ofhis contract of employment with hisemployer, whether prior notice oftermination was or was not given tothe employer, in circumstances inwhich, because of the conduct of theemployer the employee was or wouldhave been entitled, or it was or wouldhave been reasonable for theemployee to terminate the contract ofemployment without giving priornotice of termination to theemployer.”

In order to succeed in a claim forconstructive dismissal, an employee mustsatisfy one of the two tests in the statutorydefinition quoted above. The first is knownas the ‘contract test’. In order to satisfy thistest the employee must establish thenecessity of terminating his/heremployment by virtue of the employerhaving breached the contract ofemployment, either to a significant degreeor at least to such an extent that it is clearthat the employer no longer intends to bebound by one or more of the essential termsof the contract.

The second test requires the employeesimply to establish that it was ‘reasonable’for him/her to terminate the contract ofemployment without giving the employerprior notice of termination. It was the

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second test that needed to be considered inthis case. Having reviewed all the evidencepresented to me in relation to the case Iconcluded that the company had not actedreasonably in this situation. Thecomplainant was being coerced, at shortnotice and under duress, into signing anunacceptable and unilateral variation of hercontract of employment, a contract that shefelt she could not fulfil with the resourcesthat she was being given. Managementaccepted that she had legitimate concerns,yet continued to put pressure on her to signthe contract without properly addressingthose concerns. Management accepted thatthe complainant was being offered the newposition because of “her efficiency andattention to detail” and that she had made amajor contribution to the company duringher time there. Under the circumstances Iconcluded that it was not reasonable for thecompany to expect her to sign the newcontract without properly addressing theissues she had raised, nor did I think itreasonable for the company to give her anultimatum to sign the contract or she wouldbe out of a job.

The second question to be addressed waswhether it was ‘reasonable’ for thecomplainant to terminate her contract ofemployment without giving the employerprior notice of termination. Havingconsidered all the facts of the case Iconcluded that the action that thecomplainant had taken was reasonableunder the circumstances and that it wasreasonable for her to terminate her contractof employment without giving the employerprior notice of termination. I thereforefound that the complainant had beenconstructively dismissed.

The other important issues that arose out ofthis case were as follows:

the trustees of the scheme could notrely on the agreement signed by theemployer with the complainant,following the withdrawal of hercomplaint to the EmploymentAppeals Tribunal, as a defence againsther claim that she had pensionentitlements under the pensionscheme;

in the absence of a determination bythe Employment Appeals Tribunaland in the absence of an admission ofliability by the company, thecomplainant could not rely solely onthe payment of £18,000 settlement ofher claim as proof positive that shewas constructively dismissed or thather employment was terminated bythe employer for any reason otherthan fraud, misconduct or otherculpable factor on the part of themember;

As no finding had been made by theEmployment Appeals Tribunal, sincethe case was settled before the finalphase of the hearing, I determined,based on legal advice received, that Iwas entitled to find, as a matter offact, that the complainant had beenconstructively dismissed.

In conclusion, I found that the trustees ofthe pension scheme were not correctlyinformed of the circumstances of thecomplainant’s termination of employment.This was complicated by the fact that thethen Managing Director of the firm was oneof the two trustees of the pension scheme.However, had the trustees been properlyadvised it is clear that they would have beenobliged to grant the complainant a deferredpension entitlement under Rule 11(b) of thescheme.


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My Final Determination, therefore, was thatthe complainant – as a matter of fact – hadbeen constructively dismissed and shouldnow be awarded a deferred pensionentitlement, in accordance with Rule 11(b)of the scheme in respect of the period of hermembership of the plan from 1 January1992 to 31 December 1995.

CLAIM FOR A REFUND OF ‘OVERPAID’CONTRIBUTIONS

Background

I received a complaint from a retired femalemember of a scheme regarding the operationof Section 17 of the scheme which providesfor the cessation of contributions if amember becomes entitled to a full pensionon a date after normal retirement date andbefore actual retirement date. Thecomplainant’s normal retirement date at age60 was 1 February 1997, at which time shewould have had 38 years’ pensionableservice. She had purchased two years’additional service over the period September1984 to February 1997 which would haveentitled her to a maximum pension of40/60ths at her normal retirement date inFebruary 1997. The complainant retiredfrom the employment on 9 February 2002under a voluntary programme, when shehad 44 years’ company service. Thecomplainant maintained that, under therules of the scheme, she should have beenentitled to a refund of her excess pensioncontributions for the period February 1997to February 2002. She also claimed that sheshould be entitled to a refund of overpaidadditional voluntary contributions whichwere due to cease in February 1997 as perform of acceptance, that only part of theexcess had been refunded and the balancewas due.

Outcome

There were a number of complex issues thatcame to light in relation to this case. On 11December 1992 a number of changes weremade to the rules governing the operation ofthe pension scheme. These amendmentswere made to give effect to Part VII of thePensions Act 1990 (which was due to comeinto force on 1 January 1993) whichprovided that pension schemes must complywith the principle of equal treatment andthat there should be no discrimination onthe basis of sex. Specifically, rules were putin place equalising the normal retirementage for men and women at the anniversaryof joining the scheme after attaining 65years of age. Under one of these rules the‘normal retiring date’ was changed, in thecase of a female member employed in theRepublic of Ireland, from 60 to 65 years ofage.

There were three key issues that I had toexamine in relation to this complaint, asfollows:

Was the scheme rule change effectedin 1992 actually required by theamendments to the Pensions Act?

Was the amendment effectedcorrectly and were the membersproperly informed of this change?

If so what were the practical effectson the accrued rights of the membersas at 11 December 1992?

In relation to the first issue I concluded thatin December 1992 there was a legalobligation on employers and trustees underboth Irish and European law to equaliseretirement ages for males and females butwith some uncertainty about theequalisation of benefits accrued prior to 17May 1990 – the date of the European Courtdecision in relation to the Barber* case. Thedecision of the European Court in relation

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* Barber -v- Guardian Royal Exchange Assurance Group [1990] 2 CMLR 513

to this case concluded that pensions are partof ‘pay’ for the purposes of [the then]Article 119 of the Treaty of Rome, whichrequires each Member State to “apply theprinciple that men and women shall receiveequal pay for equal work.” At that point intime, therefore, the trustees and theemployer did not have the option ofretaining normal retirement ages of 60 forfemales and 65 for males. Either the age forfemales had to be increased to 65 or the agefor males had to be reduced to 60 at least inrespect of service from 17 May 1990onwards. I further concluded that thetrustees of the scheme were entitled tomake the rule change to give effect to PartVII of the Pensions Act. While it could beargued that the increase in the normalretirement age to 65 was not strictlynecessary to give effect to the equalityprovisions of Part VII of the Pensions Act, itwas clearly necessary to give effect to thetrustees’ decision, which was to equalise thenormal retirement age for men and womenat the anniversary of joining the scheme andafter attaining 65 years of age.

The second issue related to whether theamendment was effected correctly andwhether the members were properlyinformed of this change. I had alreadyconcluded that, even if the rule change wasnot strictly required by the laws of Irelandor the European Community, it did ‘relate’to them. As such the trustees were entitledto make the change in accordance with PartV, Rule 18(b) of the scheme, i.e. with thewritten consent of the employers and thepensions committee, but not of themembers. In my view, therefore, the rulechange was properly effected and thenormal retiring age for female members ofthe scheme changed from 60 to 65 witheffect from 11 December 1992. However, Inoted that the complainant never received aletter from the employers varying, or evenseeking consent to vary, her terms andconditions of employment and that shereceived updated financial statements at

various dates between 1993 and when sheretired in 2002, which continued to showher normal retirement date as being 1997,i.e. age 60. This, allied to the fact that therewas no prior consultation regarding the rulechange between the trustees and themembers, led to a situation where there wasconsiderable confusion among the membersas to what their pension entitlementsactually were. I concluded that it wasreasonable for the complainant to believe,right up to the time of her actualretirement, that her contract of employmenthad not changed and that her normalretirement age remained at 60.

The last issue concerned what the practicaleffects were on the accrued rights of themembers as at 11 December 1992 – the dateof the rule change. I concluded that, at thetime of the rule change on 11 December1992 the complainant had not completed 40years’ service, nor had she attained age 60.As such she did not have a right to stoppaying contributions. I therefore concludedthat the complainant was not entitled to arefund of her scheme contributions inrelation to the 1997 to 2002 period.However, the complainant was entitled to arefund of her scheme contributions for theperiod 1 February 2002 – her normalretirement date – and 9 February 2002 – heractual retirement date. I further concludedthat the complainant was entitled to arefund of all of the fund representing thevalue at 1 February 1997 of the AVCs whichshe had paid, adjusted back to their original‘maturity’ date in February 1997. The logicof this was that these contributions, whichhad remained invested in the fund in themeantime, had not been required to bringthe complainant’s pension to 40/60ths ofsalary, given that she had now made‘ordinary’ contributions for the whole of herperiod of membership of the scheme, from1959 to retirement.

In conclusion I noted that there stillappeared to be considerable confusion on


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the part of the members and theirrepresentatives on the precise effects of therule change made in 1992. I stronglyrecommended that serious efforts should bemade to remedy this defect, a defect whichowed its existence almost entirely to thecomplete failure of any party involved tocommunicate the matter properly at thetime. This failure extended, not just tomatters concerning the pension scheme, butequally to issues around the employmentcontracts of members as regards the age ofretirement.

SECONDMENT ARRANGEMENTS

Background

The complainant joined the employer(described here as ‘the Council’) from aconstituent college of the NationalUniversity of Ireland (‘the College’), wherehe had worked since February 1972 and wasofficially appointed to the post of AssistantRegistrar to the Council with effect from1 March 1975. The complainant retired fromthe Council on 31 December 2001 at age 62.Under an arrangement agreed between theCollege and the then ad hoc Council, for thepurpose of protecting the pension positionof himself and of another Council officerwho had also come from the College, and inthe absence of a scheme for the Council, hissalary was paid by the College, he remaineda member of the College pension schemeand the College recouped the cost of thisarrangement quarterly from the Council.This arrangement lasted until 1 September1987 when it was terminated by theCouncil following the setting up of theCouncil pension scheme in 1987. When thecomplainant retired his pensionentitlements were calculated in accordancewith the terms of the 1987 scheme.

The Council was put on a statutory basisunder an Act of 1979, which provides that aperson shall not, while in the service of theCouncil, be subject to less favourableconditions in relation to the grant of

superannuation allowances (whether byway of lump sum, pension or gratuity or ofcompensation for loss of office) than theconditions which applied to himimmediately before his transfer by virtue ofthe Act to the service of the Council. Thecomplainant maintained that he was atransferred officer for the purposes of the1979 Act and that he was thus entitled tothe guarantee given under the Actconcerning less favourable conditions. Onthis basis he claimed that he was entitled tohave his pension entitlements calculated onthe basis of the old College scheme, whichhe felt were more favourable to him, ratherthan on the basis of the 1987 pensionscheme set up by the Council. Therespondents to the complaint maintainedthat the complainant was not entitled tothe guarantee as he was not a transferredofficer but was still on secondment from theCollege and remained so until thisarrangement was terminated in 1987.

Outcome

There were a number of aspects to thiscomplaint. However, the most interestingwas whether in fact the complainant shouldbe regarded as somebody covered by Section13(3) of the 1979 Act, i.e. whether he couldbe deemed to have been an employee of theCouncil before the commencement of theAct.

Following my investigation I came to theconclusion that it could be reasonablyassumed that the complainant had in factresigned from the College and had become amember of the staff of the Council witheffect from 1 March 1975, and that thesecondment arrangement put in place wasseen as a temporary measure designed solelyto facilitate the continued accrual of pensionrights pending the establishment of ascheme for the Council. However, in myview it could not be considered a normalsecondment arrangement for the followingreasons:

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In a normal secondmentarrangement, if employer A secondsan employee to employer B, the latterhandles the payment of salary etc,even though it might reimbursesuperannuation costs. In this case theCouncil appointed the complainant asAssistant Registrar and operated whatwas in essence an agency agreementwith the College to pay his salary andaccrue superannuation entitlements,entering into a completely artificialarrangement regarding thecomplainant. Because it was anagency arrangement, the consent ofthe complainant was neither needednor sought.

One of the characteristics ofsecondment is that there is anexpectation that the employeeconcerned will in due course return tothe place of his original employment.The Revenue rules which apply tonon-statutory schemes make it clearthat this is a precondition to theapproval of a secondmentarrangement. It is evident that areturn by the complainant to theCollege was never contemplated.

According to the College there wereno formal arrangements in place toprotect the complainant’s position inthe event of the termination of hisemployment by the Council – theremay have been some sort ofunderstanding or gentleman’sagreement, under which they“wouldn’t see him stuck”, althoughthere was no very clear idea of whatthey could do with him if thecontingency arose. Such anarrangement would be completelyunenforceable at law and wasessentially worthless.

Another essential characteristic ofsecondment is that the originalemployer remains in control of the

employee’s movements and is in aposition to recall him at any time.There was no evidence that this wasthe case in this instance.

It is also clear that the complainant’srate of remuneration was decided atall relevant times by the Council andnot by the College. In addition,although he was paid by the Collegehe was obliged to forgo other benefitsof being a College employee.

It would appear also that thedismissal of the complainant fromemployment – another characteristicof secondment – would not have beenwithin the power of the College.

Another consideration is theinordinate length of the allegedsecondment. In occupational pensionschemes, Revenue require asubmission to be made andpermission to be obtained in caseswhere a secondment period is toexceed five years. If it is not at firstanticipated that it will exceed thatperiod, but in fact is about to do so,the submission must be made then.The concept of unsupervisedindefinite secondment is out.

There appeared to be a contradictionbetween, on the one hand, thecomplainant resigning and having hisservice to his date of resignationmade reckonable under Section 4 ofthe Superannuation & Pensions Act1963 and, on the other hand, havinghis service continued on the basis ofsecondment. (All the complainant’sservice from his commencement withthe College on 1 February 1972 to thedate he left the College scheme on 31August 1987 – the date the‘secondment’ ended – was deemed tobe reckonable as pensionable serviceand to be transferable under theSuperannuation & Pensions Act1963.)


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There was no merit in the argumentput forward that the complainantcould not have received tax relief oncontributions to the College schemewere he not employed by the College.Relief is routinely given throughoutthe State sector on contributionsreferable to employments other thanthose from which remuneration arises(when previous service is beingbought back, for example), Revenuetaking the pragmatic view that theState is the ultimate employer in allcases.

In essence what we were dealing with herewas an unorthodox (though eminentlypractical) administrative arrangement whichhad no legal basis, whereby a transfer wasregarded for some purposes, e.g., accrual ofpension, as secondment, but not for otherpurposes. Had there been a superannuationscheme in place in the Council at the timeof the complainant’s appointment therewould have been no question of asecondment arrangement being put in place.I concluded that it was clear that theintention was that the complainant was tobe appointed as a full time employee witheffect from 1 March 1975 and there wasnever any possibility of him returning to hisformer employment with the College.

For these reasons outlined above I concludedthat the complainant should have beenregarded, for the purposes of Section 13 (1)of the Act, as a person who, immediatelybefore the commencement of the Act, wasemployed whole time by the Council andshould also, as a result, have been regardedas a member of “the Council’s transferredstaff”.

MEMBER ABSENT AND RECEIVINGINCOME CONTINUANCE BENEFIT

Background

The complainant complained of “blatantdiscrimination by company managementand scheme administrators” with regard tothe interpretation of some of the rules of apension scheme, which was then intransition – the scheme was to be wound upand its members transferred to thearrangements of a new owner (althoughsteps were being taken to allow thepreservation of certain entitlements forthose transferring).

The complainant’s complaint was that,while looking through his benefitsstatements for the years 2001, 2002 and2003 he detected a marked discrepancybetween the figures printed on the benefitsstatements and those of the rest of theprocess operators employed by the company.He claimed that he should be on the samerate of basic pay for pension purposes asthat of the rest of the operators, eventhough he had been out of work on incomecontinuance benefit for over three years. Hecould not see any rule of the scheme whichstated that his pension benefits should beless.

In rejecting the claim, the trustees reliedupon the governing documents of thescheme, whose temporary absence rulestates that “in the event of temporaryabsence of an employed member during anyperiod the provisions of Rule 14 hereof(leaving service) shall not apply and thetrustees shall with consent of the employerdecide to what extent (if any) the employedmember shall be entitled to benefits duringsuch period”.

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Outcome

It was clear that the complainant was mostdissatisfied with the Determination of thetrustees. In particular, he contested thequestion of temporary absence. He quotedRule 23 (2) which says that:

“an employed member should betreated as being on temporaryabsence under this rule if the trusteeswith the consent of both theemployer and such employed memberelect to treat such employed memberas on temporary absence when heleaves the employment of theemployer”.

He maintained that he had never given hisconsent, either orally or in writing, to beingtreated as being on temporary absence. Ifound this rule most unusual, in requiringthe consent of both the employer and themember. From correspondence with thecomplainant, it was clear that he felt thattemporary absence implied that somehowhe was not an employee of the company,which was not the case.

Examination of the rules bore out thecontention of the complainant, that theposition of members in receipt of incomecontinuance benefit was not specificallydealt with under the terms of the rules ofthe pension scheme, but it was clear thatthe trustees and the employer used thetemporary absence rule as a method ofdealing with members who becameclaimants under the disability scheme, andwho were promised under the terms of thatscheme that their membership of thepension scheme would be maintained. Theonly available alternatives to ‘temporaryabsence’ were to treat him as having leftservice with a preserved benefit, or to treathim as an early retirement – neither wassatisfactory.

It was also apparent that the complainantstill had not accepted that his ‘disability’commenced at the date of his injury, andnot at the date of commencement of theincome continuance benefit. This did makea difference to the calculation of hispensionable pay but I could not see anyreason why a pay increase given after thedate of his first absence could be taken intoaccount.

I determined that the complainant wasbeing correctly treated as a temporaryabsentee under the rules of the pensionscheme to which his benefits andentitlements had been transferred. I do notknow what provisions apply in the rules ofthe new pension scheme, but I wouldstrongly urge that any rule requiring theconsent of a member who is on incomecontinuance benefit to be treated as atemporary absentee should be eliminated, asit serves no practical purpose. I would alsostrongly urge employers and trustees tocater specifically under pension schemerules for those on income continuancebenefit, and not to rely on the ad hocuse of temporary absence provisions,which are sometimes vague and oftendiscretionary, to deal with situationsthey were not designed for.


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CONSTRUCTION FEDERATIONOPERATIVES PENSION SCHEME(CFOPS)

Background

The Construction Federation OperativesPension Scheme (CFOPS) was set up in 1965by employers who were registered with theConstruction Industry Federation (CIF) toprovide pension and mortality benefit forworkers in the construction industry. Theterms of the Registered EmploymentAgreement for the Construction Industryrelating to Pensions, Assurance and Sick Paywere registered with the Labour Court on 7March 1969, under the Industrial RelationsActs 1946-69. As a result of this Agreementit became compulsory for all employers inthe construction industry to providepension and mortality benefit for all manualworkers. At that time the scheme wasopened to all employers in the industry,whether they were members of the CIF ornot.

All craft persons and general operativesbetween the ages of 20 and 65 years arelegally bound to be entered into the schemeonce their employing firm is covered by theRegistered Employment Agreement for theconstruction industry. Other employeeswho are not compulsorily covered may beentered in the scheme by arrangement withtheir employer and the scheme. The CFOPShas been approved by the RevenueCommissioners as a bone fide pensionscheme for the purposes of the TaxesConsolidation Act 1997 and is considered tobe a defined benefit scheme within themeaning of the Pensions Act 1990.

I have received various complaints fromworkers in the construction industryalleging that their employer failed to registerthem in the scheme; registered them in thescheme but failed to deduct and remitcontributions on their behalf to the scheme;or deducted contributions but failed toremit them to the scheme.

An employer who fails to register aqualifying employee who is entitled to thePension, Assurance and Sick Pay Benefits ofthe Registered Agreement is in breach of theAgreement. In such cases the employerconcerned is fully liable for the payment ofall benefits due to the employee under thePension, Assurance and Sick Pay Terms ofthe Registered Employment Agreement,including the payment of mortality benefitto the employee’s dependants in the eventof the death of the employee.

Since the Pensions (Amendment) Act 2002,it has been a criminal offence for anemployer to fail to remit contributionsdeducted from the pay of employees to apension scheme within 21 days of the end ofthe month in which those contributionshave been deducted. If I find that thisoffence has occurred, I refer the case to thePensions Board for prosecution. Penalties forcriminal offences under the Pensions Act canbe as high as fines of €12,700 and terms ofimprisonment of up to two years.

More serious, however, is the possibilitythat contributions, which had beendeducted from employees’ pay and notremitted to the scheme, had beenmisappropriated. If that were the case, Iwould have no choice but to report thematter to the Garda Bureau of FraudInvestigations for further scrutiny.

In one particular complaint that I received,the complainant alleged that his formeremployer was guilty of maladministration inrelation to the CFOPS in that:-

1. He failed to duly register him in thepension scheme when he firstqualified for inclusion

2. Some of the pension schemecontributions deducted from hissalary were not paid into the scheme.

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Outcome

In the case in question it was establishedthat the complainant’s employment met thequalifying criteria for membership of thescheme during the period from August 1996to 28 July 2005.

The scheme trustees confirmed that theemployer was registered with the schemebut had failed to register the complainant orpay any contributions on his behalf underthe scheme.

In November 2005 I issued a FinalDetermination, declaring that the employerwas liable for all the outstandingcontributions due to the scheme in respectof this employment, and instructed that theamount of €11,550 be settled, as soon aspossible. Payment was received under thescheme shortly thereafter.

Unfortunately, cases like this are all toocommon and this complaint is typical ofa large number received in relation toCFOPS.

Repayment of arrears – CFOPS

As I was beginning an investigation into onecomplaint of non-payment of contributionsin CFOPS, I wrote to the employerconcerned, advising him that I would beaccessing Revenue and Social Welfarerecords for information concerning theemployee who had complained. I hadalready been supplied by the ConstructionIndustry Monitoring Agency (CIMA) with acopy of a recent form P 35L tax return forthe employer. This revealed a large numberof employees, about half of whom wereregistered in the scheme. I queried this withthe employer, who contacted my office andasked for a suspension of the investigation,so that he could talk to CIMA. I was lateradvised by that organisation that theemployer concerned paid arrears ofcontributions to the scheme in excess of€200,000.


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HYBRID SCHEME – WINDING-UP –ABATEMENT OF DC MEMBERS

Background

The complaint related to the treatment ofmembers of a defined contribution sectionof a hybrid scheme. A hybrid scheme in thisinstance was a pension scheme with twosections – a defined contribution (DC) and adefined benefit (DB) section. Thecomplainant was a member of the schemeon a defined contribution basis. The schemewas in difficulty and the scheme actuaryhad recommended that, among other things,the employer should increase hiscontribution rate to 34% of payroll. Theemployer determined that he could notafford this and indicated he was terminatinghis liability to contribute to the scheme andwas establishing a new DC scheme for allemployees. The trustees were left with noalternative but to initiate a wind-up of thescheme. The trustees noted that if the DBsection of the scheme was to be treated inisolation, transfer values for the DBmembers would be reduced byapproximately 49%. However, if the assetsand liabilities in respect of the DC sectionwere included the abatements across allmembers would be 36%. The complainantconsidered it unfair that the assets of theDC section should be used in this way.

My concerns related to whether or not itwas correct, having regard to the provisionsof the Definitive Trust Deed and Rules, thePensions Act and trust law generally, for thetrustee to reduce benefits for active anddeferred members in both the DB and theDC sections as opposed to limiting anyadjustment to the DB members only andproviding 100% of benefits to the DCmembers in the event of a wind-up.

Outcome

In general, the Pensions Act gives a memberof a funded scheme the right to a transferpayment to another scheme or arrangementinstead of preserved benefit. The transferpayment in respect of a preserved benefit orpart of a preserved benefit which has beendetermined on a DB basis is the actuarialvalue of such preserved benefit. The Act alsoprovides that such transfer payments mustbe calculated in accordance with anyguidelines issued by the Society of Actuariesin Ireland (or with any other applicableguidelines) and specified in regulation. Thetransfer payment in respect of a preservedbenefit or part of a preserved benefit whichhas been determined on a DC basis is theaccumulated value of the appropriatecontributions which relate thereto.

As can be seen, there are two distinctmethods of calculating preserved benefitsdepending on the type of scheme involved.The trustees took legal advice on this issueand also sought advice from the PensionsBoard. As a result of the advice receivedfrom both these sources, the trustees wereof the opinion that the trust deed and thePensions Act required them to treat thescheme as if it were a DB scheme and toabate equally the benefits of all members ofthe scheme in the event of a deficit onwinding-up.

In my consideration of this approach Ireviewed the trust deed and rules. Clause 17of the trust deed dealt with winding-up ofthe scheme and refers to the “remainingassets comprising the Fund” being applied tosecure benefits. The ‘Fund’ was defined inthe Trust Deed and Rules as “... the assetsheld by the Trustees for the purpose of theScheme.” A ‘member’ was defined as anyperson admitted to membership pursuant toRule 2, which provides for entitlements tobenefits “in accordance with the Scheduleunder which [the employee] qualifies as anEligible Employee....” The related schedules

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are Schedule Two for DC members andSchedule Three for DB members.

Schedule Two of the trust deed and rulesrefers to a “Member’s Account” whichmeans in respect of a member, the amountcredited to his account in accordance withthe rules. Rule 3(d) of the Second Scheduleprovides that:

“The Trustee shall keep an account inrespect of each Member (to be called“the Member’s Account”) of the cashsum which in their opinion havingregard to the advice of the Actuary isequal to that proportion of the valueof the Fund attributable to the totalinterest of the Member (relative to allother Members) in the Scheme ...”

Under the Pensions Act, when a scheme iswound-up and not replaced, members stillin employment who have met thequalifying condition become entitled to apreserved benefit at the date of winding-upas if there has been a termination ofrelevant employment. However, where ascheme is wound-up and replaced with anew scheme (e.g. a DB scheme replaced by aDC scheme) and the replacement schemeapplies to such employees, no entitlement toa preserved benefit arises unless or untiltheir relevant employment subsequentlyterminates.

In the event of a scheme winding up,however, the trustees are required to applythe resources of the scheme in accordancewith Part IV of the Act. In particular, thetrustees may secure benefits by making atransfer payment or payments to anotherscheme or to an approved insurance policyor contract. This scheme combined both DBand DC members. The DC members’accounts form part of the fund which inturn is applied to secure benefits for all themembers.

I discussed this issue with the PensionsBoard, and they confirmed to me that theyare satisfied that a scheme established onthis basis should be wound up as if thescheme is a DB scheme. The Board’s viewwas that it is a hybrid scheme. The PensionsAct refers to ‘hybrid schemes’ as schemeswhere an element of retirement benefits iscalculated on a DB basis and anotherelement is calculated on a DC basis, thedesignated benefit in relation to eachelement being calculated separately on theappropriate basis. I considered thisdescription to be intended to describesituations where an individual member’sbenefits were a mix of DB and DC basis andit did not therefore apply cleanly to thescheme in question.

However, this was an unusual situationwhereby the scheme itself had twoelements. While this type of schemeoperates reasonably well when things aregoing well, difficulties clearly arise when thescheme goes into winding-up with a deficit.That said I could see no obstacle under thetrust deed and rules, the Pensions Act ortrust law generally, to the trustees abatingthe DC members in the same manner as theDB members and I was satisfied that theemployer and the trustees were acting ingood faith in dealing with the winding-up.In this regard, they informed me that theemployer had agreed to make threeadditional special contributions over threeyears to make up the shortfall in the DCmembers transfer values should they opt tojoin the new DC scheme. For DB members,it is intended to pay an additional 1.5% ofbasic annual salary for each year of serviceover the shorter of the member’s term toretirement, or five years.

Taking all of this into account, I could notsee any merit in commencing aninvestigation under Section 131 of thePensions Act and I instructed that thecomplainant and respondents be advisedaccordingly.


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PUBLIC SERVICE SCHEME –CALCULATION OF ARREARS OFCONTRIBUTIONS – INSURABILITY OFEMPLOYMENT

Background

The complainant was employed in a part-time capacity by a public sector employer, towhich the Local GovernmentSuperannuation Scheme (LGSS) applies,from 16 July 1986 to 16 February 2003 whenshe was appointed as a permanent officer.She retired in February 2004. Thecomplainant argued that the employer erredin placing her on Class A social insurance onher appointment to a permanent andpensionable position and that this causedfinancial loss to her by way of (a) thecalculation of her pension entitlementsunder the LGSS and (b) on the cost to her ofher liability to reckon previous temporaryservice. She argued that as she was incontinuous employment up to herappointment to a permanent andpensionable position she was entitled tohave the modified rate of social insuranceapplied to her.

Outcome

On examination, it quickly became apparentthat this was more a question as to theproper insurability of the employment thanan occupational pensions issue per se. Theindividual in question had had a number ofsmall ‘breaks in service’ during which sheclaimed unemployment benefit; and itappeared that, on the basis of these breaks,the employer decided that her contract hadterminated, and treated her as a newentrant to the public service. As decisions asto insurability of employment are moreappropriate to the Department of Social andFamily Affairs, I referred the matter toScope Section of that Department. ScopeSection is the section of that Department

responsible for deciding on insurability ofemployment issues in accordance withcommon and statute law and any decisionthey make is then open to appeal to theSocial Welfare Appeals Office, which is anindependent body. In making the referral, Iasked about the definition of ‘break inservice’ being used by Scope Section andqueried whether the fact that a personsimply had ‘credits’ on his or her socialinsurance record necessarily meant a breakin service within the ordinary meaning ofemployment legislation.

Scope Section found that the complainantdid not in fact have a break in service. TheDeciding Officer explained that the reasonbehind his decision is that casual claims ofunemployment benefit do not necessarilyconstitute a break in service under the SocialWelfare (Consolidated Contributions &Insurability) Regulations, 1996 – S.I. No 312of 1996, the governing Regulation. As aresult of this decision, a revised pension andliability for pension contributions issued forthe complainant which reflected the fact shewas insurable under a modified class ofsocial insurance.

This decision may well have implications forother cases in other public serviceemployments which have similar provisionsin their pension schemes.

Note: Another case relating to similarcircumstances was also referred toScope Section during 2005 for decision.Scope again found that the complainantwas properly insurable at the modifiedrate of social insurance. A further case,with slightly different circumstances,was referred during the year, in whichit was determined that there had been avalid break in service and that thecomplainant was therefore properlyinsurable at the full rate of socialinsurance. These cases are important inan occupational pensions contextbecause of the knock-on effect which

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the treatment of members for socialinsurance purposes has on theirtreatment for pension purposes withinthe schemes and can have a significantimpact on the cost of buying back pre-scheme service.

PUBLIC SERVICE SCHEME – TRANSFEROF SERVICE – ‘KNOCK FOR KNOCK’BASIS

Background

This case related to the transfer of servicebetween the Local GovernmentSuperannuation Scheme (LGSS) and auniversity. The complainant had beenemployed in a public service organisation towhich the LGSS applied and resigned to takeup employment with a Dublin university.The complainant applied to transfer 32.858years reckonable service to the universityunder the Local Government (Transfer ofService) Scheme, 1984. The university is alisted member of the scheme on a ‘knock forknock’ basis which means that the receivingauthority or employer will take account ofall transferred service without transfervalues being involved. The organisationfrom which she resigned confirmed to thecomplainant that the service had beentransferred on this basis, but the receivingauthority, the university, refused to accept iton a ‘knock for knock’ basis and informedthe complainant that the transfer betweenorganisations on a ‘knock for knock’ basiswas never automatic and that it was mostlikely that the transfer for the complainantwould be based on a transfer amount whichwould purchase years in the universityscheme.

Outcome

The Department of the Environment,Heritage & Local Government which is theDepartment responsible for policy matterson the LGSS, expressed surprise that anorganisation which originally agreed to enterthe transfer scheme on a ‘knock for knock’basis would now attempt to move awayfrom it. However, the Department pointedout that the system provided for a preferredoption and that this is not set in stone. Itwas also pointed out that, under thescheme, each organisation is supposed toagree the actual method of transfer with theother – the transfer scheme is effectively anumbrella for a series of bilateral agreements.Following consultation with the trustees ofthe university scheme, they agreed to acceptthis transfer on a ‘knock for knock’ basisand informed me that they are reviewingtheir preferred membership option.

PUBLIC SERVICE SCHEME – REFUSALTO ACCEPT A TRANSFER VALUE FROMA FUNDED SCHEME TO A NON-FUNDED SCHEME

Background

This complaint related to the refusal of apublic sector organisation to accept atransfer value from a funded pensionscheme in the United Kingdom. Thecomplainant was advised by theorganisation that there was no provisionwithin the scheme to provide for theacceptance of a transfer value from the UKinto their scheme and that there was noindication of any transfer arrangement beingintroduced in the near future.


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Outcome

There appeared to be some confusion in therespondent organisation about this. Prior to1996, a person entering public serviceemployment from the private sector coulduse a transfer value from a private sectorscheme to secure some service credit underthe public service scheme. However, thePensions (Amendment) Act 1996, introducedchanges that effectively barred paying atransfer value from a funded scheme into anon-funded scheme. This meant that themajority of public sector schemes could notaccept such transfers. This prohibition waslater removed by Section 22 of the Pensions(Amendment) Act, 2002.

I contacted the organisation involved andinformed them of this and requested thatthey review their decision not to accept thetransfer value from the UK scheme.

This complaint again highlights theneed for pension scheme administratorsto be aware of technical changes to thePensions Act, which are made almostevery year. This applies especially tothe administrators of public serviceschemes who, because they areadministering schemes that are oftenexempt from certain parts of thePensions Act, may not pay as muchattention as they should to changesintroduced in other parts of the Act.

PUBLIC SECTOR SCHEME – ILL-HEALTH PROVISIONS WHILE ONPRESERVED BENEFIT – REVISED DATEOF AWARD OF PENSION

Background

This complainant was made redundant by alocal authority in November 2003 and leftservice with a preserved benefit entitlement.He initially claimed unemployment benefitand assistance but later became ill andclaimed disability benefit. His initialcomplaint to me revolved around hisattempt to get a refund of contributionsfrom the scheme. He argued that the ruleshad changed during his employment,adjusting down from five years to two forcompulsory preservation of benefits andthat this was unfair.

Outcome

As the complainant had more than twoyears’ actual service, there was nothing Icould do regarding the refund of his pensioncontributions. However, given his medicalcircumstances I wondered why he was notgetting an ill-health pension from thescheme if his disability was consideredpermanent and I advised his legalrepresentative to this effect. As a result, heclaimed an ill-health pension and this claimwas successful, payable from the date onwhich the claim was made. However, thisled to a second complaint – this time aboutthe award date of the pension. I pointed outto the complainant that, to be fair to thetrustees of the scheme, they could onlyconsider an ill-health pension when theywere made aware of the illness. However, ifthe complainant could provide medicalevidence that he was permanently unfit forwork from an earlier date, I would expectthe trustees to give fair consideration to it.The complainant provided the medicalevidence and the trustees revised the awarddate.

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This complaint also raised issues relating tothe provision of information to people withpreserved benefit entitlements. It was clearthat the complainant, and his legalrepresentatives, had no idea that he mighthave been entitled to an ill-health pensionpayable immediately. The local authorityconcerned informed me that it is theirpractice to inform all employees leavingservice of their entitlements and theypresented a copy of a standard letter usedfor this purpose. This letter does indeedrefer to the possibility of preserved benefitsbeing paid early in the event of permanentinfirmity. However, the local authoritycould not confirm that such a letter had, infact, issued to the complainant. It is alsoclear that the local authority became awareof the complainant’s general ill health whenhe originally applied for a refund ofcontributions. However, while theyinformed him that he was not entitled toany refund, they failed to inform him of thepossibility of an ill-health pension, subjectof course to his satisfying certain conditions.

PUBLIC SERVICE SCHEME – NOTIONALSERVICE – MALADMINISTRATIONLEADING TO UNDERPAYMENT

Background

This complaint related to a ‘purchase ofservice’ scheme (notional service scheme)operated in the Civil Service. Thecomplainant was working on a job-sharingbasis and agreed to purchase 9 years and 109days in order to have maximum pensionableservice of 40 years at age 65. TheDepartment concerned wrote to her on 7May 1996 informing her that, provided shecontinued in service and had no servicewithout pay, she would have full service atage 65 by contributing an additional 6.51%of salary from 12 July 1996 to 11 July 2022.She was informed that the cost of buyingone year of service based on her age at the

time was 0.7% of salary and that the cost ofbuying the full period was therefore 6.51%(0.7% x 9.3 years). She replied in writing on19 June 1996 agreeing to purchase the periodof service concerned.

She was contacted by the Department inJune 2003 and informed that a discrepancyin relation to her notional service deductionshad come to their attention. TheDepartment stated that, in order topurchase the 9 years and 109 days, sheshould have been paying 6.51% of the full-time salary and not her job-sharing salary.This had led to an underpayment of€7,748.78 at that time and she was asked tocontact them with a view to arranging asuitable means of redressing the situation.The complainant was obviously dissatisfiedand upset by this and initially sought tohave the Department make good thisshortfall which was, as she claimed, due totheir error. The Department confirmed toher in November 2003 that they were not ina position to waive or negotiate theunderpayment and offered a seven-yearperiod in which to pay the arrears due (thisreflected the period over which the incorrectdeductions were made). The Departmentalso indicated that it would have noobjection in recouping the monies over alonger period provided that it is paid inadvance of her reaching age 65 in 2022, orher actual retirement date, if earlier. TheDepartment accepted that there was anadministrative error on their part andregretted the inconvenience but clearlyindicated that unless the complainant madegood the shortfall she would be short serviceat normal retirement age.

The complaint then became subject to along running exchange of correspondencebetween the Department and thecomplainant’s trade union. Her trade unionproposed that she be allowed repay theamount due by way of deduction from herlump sum at retirement. However, theDepartment refused this, stating that one of


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the core principles of the scheme was that itwas self-financing, and that to allow hermake any outstanding repayment by way oflump sum deduction (which at the earliestwould be in 13 years time) would result inthe purchase being made on ‘reduced rates’.The Department then pointed out thatthere was in fact no ‘underpayment’ andthat there was no obligation on thecomplainant to pay this money. Failure topay would simply result in her having lessservice at retirement than intended, as shewould benefit only from the value of thecontributions actually paid. They alsoadvised that if the complainant were toconsider purchasing this shortfall of years,she would have to enter a further separateperiodic agreement which would be basedon a rate appropriate to her age nextbirthday (this would obviously be higherthan the 0.7% quoted back in 1996).

Outcome

The complainant brought her complaint tome and I was immediately struck by thesimplicity of the facts:

1. The Department had erred in themanner in which they implementedthe complainant’s agreement topurchase service and indeed hadadmitted this in June 2003.

2. The complainant had been copiedwith the relevant circular, dated June1994, when she applied to purchasethe years. This circular related to theextension of the purchase scheme tojob-sharers and it clearly stated that‘salary’ means twice the actual rate ofthe officer ’s job-sharing pay.

3. The offer to allow the complainantpay the outstanding amount overseven years appeared reasonable.

4. The apparent withdrawal of this offerby the Department appeared to beunreasonable.

Following consultations between theDepartment concerned, the Department ofFinance and my Office, the employingDepartment agreed “on an exceptional basis”to allow the complainant the option ofrepaying the amount over a period no longerthan seven years, on the understanding thatthe repayment would be commencedimmediately. I considered this a fair andreasonable resolution of the matter.

PUBLIC SERVICE SCHEME – DATE OFACTUAL RETIREMENT – AVC – SINGLEPREMIUM PAYMENT

Background

This complaint related to the manner inwhich a request for permanent ill-healthpension was dealt with. The complainantwas a nurse who had been out on sick leavesince July 2002. She applied for retirementon ill-health grounds towards the end of2002. During the period July 2002 toDecember 2003 the complainant attendedfor medical consultations on a number ofoccasions on the request of her employer.The last such consultation was on 5December 2003. In the intervening period,the complainant also contacted thecompany administering her AVC schemeand made enquiries about making a singlelump sum contribution in advance ofretirement on ill-health grounds. She wasadvised to obtain details of what ill-healthpension entitlements she would be entitledto and to provide an actual retirement date.While she received details of possiblebenefits, she did not forward them to theAVC administrators as she had noretirement date to work from.

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The complainant then received a letter fromthe employer on 14 January 2004 informingher that her retirement on the grounds of illhealth had been approved. When shecontacted the employer by phone to requestdetails of benefits and the date from whichshe would retire – as she was consideringmaking a single premium payment in to herAVC scheme – she was informed that shehad in fact been retired since 18 December2003!

She was also informed that as there was noformal application for retirement on ill-health grounds from her, she would have tofill in an application and was advised to puta current date on this letter of application.She then submitted a written application forretirement on the grounds of ill health andrequested a retirement date of either 20January 2004 or 10 March 2004, the date onwhich her existing period of approvedpension rate of pay would cease. However,even on appeal, the employer insisted thatthe date of retirement was 18 December2003 as this was the date on which themedical professional had certified her aspermanently unfit for work. The AVCadministrators informed her that it wasnow too late to make any additionalcontributions to the AVC scheme as she hadalready retired.

Outcome

The scheme involved was a public servicescheme. The date of retirement is importantto the complainant, both from an AVCpoint of view and from the calculation ofher lump sum, due to the fact that abenchmarking award had become payable inJanuary 2004. I wrote to the employerinforming them that my understanding ofthe scheme from which the complainantretired was that the effective date of cesserof office can be taken as the last day of paidservice where sick pay (or pension rate ofpay) was paid after the date of signing of a

Certificate of Permanent Infirmity; providedthat such payment was not recouped. Inoted that the employer had approved afurther three months of pension rate of payfor the complainant on 15 December 2003covering the period 11 December 2003 to 10March 2004. The employer conceded thatthey had erred on this and agreed that theeffective date for retirement should be 14January 2004 – the date to which she waslast paid. As a result of this, I contacted theRevenue Commissioners on behalf of thecomplainant and indicated that thecomplainant had, through no fault of herown, fallen foul of a Revenue requirementthat she make any additional contributionsto her AVC scheme in advance of herretirement. Revenue agreed by specialconcession that they would be prepared toreconsider allowing her make a singlepremium payment to her AVC scheme. Iwrote to the AVC administrators to informthem of this and pointed out my concernsthat they appeared to have made no effortto intercede with Revenue on thecomplainant’s behalf given the very specificcircumstances of this case. The AVCadministrators accepted that their servicecould have been better and agreed to waivetheir charges on the handling of the singlepremium and liaised with the complainant’slocal Inspector of Taxes to ensure thatproper balancing statements issued and thatrelevant tax relief was applied.

Leaving aside the technical error madein relation to the retirement date in ascheme which is complicated at the bestof times, I find it appalling that anyemployer could write to an employeeand inform her that she had beenretired, without her knowledge, sincethe previous month. It displays a lackof consideration and basic goodmanners which do no credit to theorganisation concerned.


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AVC – DELAY IN DEALING WITHBENEFITS – FALLING VALUES

Background

This case related to a person who retired inJanuary 2002 and asked the schemeadministrators to set up a spouse’s pensionusing his AVCs. The request was not actedon in a timely manner due to the persondealing with the matter going on maternityleave. When action was finally taken, thecomplainant was offered a guaranteedspouse’s pension of €3,352 p.a. in August2002. The complainant signed and returnedthe offer without delay. However, due tofurther inaction on the part of theadministrators, the complainant wasinformed in January 2003 that the spouse’spension benefits were now only valued at€2,118 p.a. This resulted from falling AVCvalues in the intervening period. The valueof the AVC fund in February 2002 was€10,729. At August 2002 it had fallen to€9,586 and by January 2003 it had fallen to€8,542.

Outcome

The complainant was initially advised toput his complaint through the pensionscheme’s Internal Disputes Resolutionprocedure. I was later made aware by thecomplainant that the scheme administratorshad failed to comply with the statutoryrequirement to issue a Notice ofDetermination within the specified timelimits. As a result, I contacted the schemeadministrators and informed them thatfailure to meet the requirements of Article5(3)(b)(i) of the Pensions OmbudsmanRegulations (S.I. No. 397 of 2003) was abreach of the Pensions Act. Following thisintervention and a number of discussions onthe complaint itself, the schemeadministrators agreed to honour the originalvalue of the AVC fund at the date ofretirement.

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2005...scheme (cfops) 25 cases solved by mediation 27 hybrid scheme – winding-up – abatement of...

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