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10 Mar 06: Guidance Note for Trustees on Internal Disputes Resolution (IDR)

Ref: PO G.01.06
A number of queries have arisen in relation to how trustees of schemes should operate their IDR procedures. While the operation of IDR procedures is primarily a matter for the trustees themselves to consider, a number of queries raised a particular issue which I feel might usefully be addressed by the issuing of a Guidance Note.
The issue at question is:
If the trustees make a determination under the scheme’s IDR procedure that overturns the original decision, can that determination be acted upon by the trustees without the written consent of the complainant to be bound by such determination?
Example: The trustees, having reviewed a complaint in relation to the non- inclusion of 20 hours’ overtime in the calculation of final pensionable remuneration, decided that five of these hours should be considered pensionable on the basis that they meet the relevant criteria. The following questions arise:
1. Should the trustees arrange a review of the complainant’s pension benefits and pay any arrears due if the complainant refuses to accept the Notice of Determination from the trustees and then brings a complaint to me?
2. Should the trustees arrange a review of the complainant’s pension benefits and pay any arrears due if the complainant accepts the Notice of Determination from the trustees, without prejudice, but indicates to them that he will take his case for the remaining element of the overtime to me as a complaint?
3. Should the trustees arrange a review of the complainant’s pension benefits and pay any arrears due if the complainant simply fails to respond to the Notice of Determination?
4. What happens in the scenario where the complainant accepts the Notice of Determination from the trustees but later brings a complaint to me?
Guidance
The procedures for internal resolution of disputes are set out by regulation under the Pensions Ombudsman Regulations, 2003, (S.I. 397 of 2003). I believe that article 5(3)(b)(ii)(D) is the relevant provision here. This article provides that the Notice of Determination under the scheme’s internal disputes procedure shall include a statement that the determination is not binding upon any person unless, upon or after the making of the determination, the person assents, in writing, to be bound by it. Therefore, if the complainant does not agree in writing with the decision, the question arises as to whether the trustees should implement the determination, especially if they are aware of a complaint being made to me.
My simple answer to this that they should do so. This is especially so where the decision is in any way to the benefit of the complainant. The trustees have a fiduciary duty to the member and if they are aware of an incorrect payment whereby the member is receiving benefits that are less than those to which he is entitled, they must take all immediate and reasonable steps to address this. This is without prejudice to any subsequent investigation and determination that I may make in relation to any complaint. Any failure to do this could in itself be considered maladministration.
However, where the determination of the trustees is to the detriment of the member (e.g. reducing benefits), the trustees should consider the position more closely. Taking the fiduciary duty of the trustees into account again, it may be in the interests of the trustees and the complainant to immediately take steps to reduce payments in order that an overpayment does not continue to grow. However, there may well be situations where the trustees quite correctly decide to hold off implementing the determination until I have had the opportunity of investigating any resulting complaint. This will ultimately be a decision for the trustees to take on a case by case basis.
Therefore, in relation to the scenarios listed at (1), (2) and (3) above, I consider that they should immediately review the complainant’s entitlements. In relation to scenario (4), I would take the view that, if the complainant agreed in writing to the Notice of Determination, I would more than likely refuse to accept the complaint. The exception to this would be where the complainant alleges he was in some way coerced into accepting it or the Determination was inherently wrong and the complainant was not in a position to realise this.

Paul Kenny
Pensions Ombudsman
10 March 2006