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24 July 2012: Pensions Ombudsman Launches 2011 Annual Report



Surge in Complaints about Pensions

Pensions Ombudsman reviews 2011 and highlights the importance of clear communication in 2012

Minister for Social Protection, Joan Burton TD, speaking at the launch of the 2011 Annual Report of the Pensions Ombudsman said that "the State cannot continue to take the main role in pension provision, given the sustainability of the public finances and the demographic projections that we face. People should be confident and secure about their retirement expectations. They should not arrive at pension age and find that their incomes are well below what has been promised to them." She also stated that: "our objective must be a pension system which will deliver an adequate retirement income for all which is, at the same time affordable and sustainable for the State."

Pensions Ombudsman, Paul Kenny, speaking at the launch of his 2011 Annual Report, noted that 2011 was a very busy year for his Office. This trend is continuing in 2012. The number of new cases in the first half of 2012 is more than double the number of cases received in the same period in 2011. It has risen from 584 new cases in the first half of 2011 to 1,171 new cases in the first half of 2012. Complaint cases have also increased in complexity. He said that: "Occupational pension schemes are under severe pressure at the present time. Defined Benefit schemes in the private sector appear to be in significant difficulties – more and more of the complaints that are now arriving at my Office seem to centre on matters arising from the insolvency of those schemes, or issues that have their origins in decisions to wind them up. Defined contribution schemes haven’t had it easy either".

The Pension Ombudsman expressed concern about the clarity of communications relating to pensions. He highlighted the need for clear and consistent communication between employers, trustees and scheme members. Retirement can be an anxious and stressful time, and is a time when people require clear communication and comprehensive information. In times of economic difficulties, it is essential that people have a service of redress that is accessible to them, should they experience problems with their occupational pensions.

In these uncertain times, people are really worried about their long-term financial security. Based on the complaints coming to his Office, it is clear that people did not fully appreciate the inherent risks when they were initially taking out pensions. Equally, they did not fully appreciate the complexity of the products that they had bought until they started taking their pensions. He spends some of his time clarifying letters and communications sent by pension providers, which the recipients simply do not understand. Today, he has taken a leaf out of his own book, so to speak, by publishing a plain English guide for pension complainants. He has, for the first time, published material in Braille for the visually impaired. He has also introduced a new Complaints Form in both English and Irish.

Communication and awareness-raising are an important part of what his Office does. He is conscious that his Office is funded by the taxpayer and that he needs to give value for money. He has put a lot of effort into modernising and updating his website and has revised and simplified complaint forms, leaflets and brochures, so that people know where he is, what he does and how he can help them.

The Pensions Ombudsman provided details of four types of sample cases resolved by his Office.

Delay in paying death benefit

Arthur M was a member of a company pension scheme when he died in December 2007. At the time of his death, the value of his scheme benefit stood at €149,000.

By the time his widow Eileen received the final settlement in April 2009, this had shrunk to just €106,000. The reason for this was that the scheme administrators had not taken the correct steps to protect the value of the fund as soon as they been notified of Arthur’s death. In this case, the administrators accepted the Pensions Ombudsman’s findings and agreed to settle at the full value of the fund at the time of death.

Pension Company did not know the rules of a scheme they managed

In September 2008, Susan F asked her pension company to move her pension fund into a cash fund, as she believed that this would be more secure than the managed fund it had been in up to that point.

The company did not follow her instruction, and told her that the rules of the scheme did not allow her to direct them what to do.

Before the matter could be resolved, Susan’s company went into liquidation and she was made redundant. Eventually, her pension was moved into cash, but by this time it had lost value, and she believed that the pension company was at fault for not switching funds when she had asked them to do so.

When the case was brought before the Pensions Ombudsman, he agreed with Susan that under the rules of the scheme she was fully entitled to instruct the pension company where to place her funds. The main problem here was that the administrators simply did not know the rules of the scheme under their care. The Pensions Ombudsman directed the pension company to treat Susan’s benefits as if the funds had been switched to cash when she had first asked for this to be done.

Poor record keeping and lack of written instructions

Marie J worked as a public servant, and was a member of an AVC plan that was established alongside the main Superannuation Scheme.

In 2007, Marie gave the trustees of the AVC plan (who also acted as consultants) what she believed were clear instructions to make her funds more secure. This instruction was not followed, however, and Marie’s funds suffered a considerable loss in value with the downturn in the investment markets in late 2008.

Marie’s instructions to the trustee, however, were never written down, and neither Marie nor the trustee had any notes of meetings or phone conversations to that could verify the instruction. The trustee acknowledges the receipt of some kind of instruction, but could not confirm what that was, and he interpreted it as an instruction to ‘do nothing’.

Marie clearly had the intention of trying to ensure that her fund would not suffer any reduction in value, but she had not put her instruction in writing.

The difference in value between what the fund was worth at Marie’s retirement date and what it would have been worth if it had been moved to cash 18 months before that date was just over €3,200. The Pensions Ombudsman directed the trustee to pay this amount plus interest to Marie’s plan. He also directed the trustee to accept only written instructions from clients in the future.

Transfer of funds

Monica F worked for the same company for over thirty years and was a member of the company’s defined benefit scheme for all of that time.

The scheme was wound up in 2007 and each member’s funds were transferred into a retirement bond invested in a consensus fund. The poor performance of the consensus fund meant that the value of Monica’s pension fund declined.

The main point of Monica’s complaint to the Office was that the trustees and their advisers had been negligent in transferring the entire funds of the scheme into the consensus fund, and that they were responsible for her considerable financial loss.

In this type of scenario, however, scheme members are required to take responsibility for their own funds, and to decide themselves how they should be invested. The fund administrators had made this clear to Monica, but she had not understood just what this meant. She had, after all, spent over thirty years as a member of a scheme where she had not been expected to make this decision for herself. While the Pensions Ombudsman did have some sympathy for Monica, he did not accept that the administrators were negligent in this particular case.


Note for Editors

The Pensions Ombudsman investigates in an independent and impartial manner, complaints of financial loss due to maladministration and disputes of fact or law, in relation to occupational pension schemes, Personal Retirement Savings Accounts (PRSAs) and trust Retirement Annuity Contracts (RACs). He may award compensation for financial loss. He is a statutory officer and exercises his functions independently of government and the pensions industry. He reports to the Houses of the Oireachtas. There is no cost to the individual complainant for this service.

Paul Kenny is the Pensions Ombudsman. He was appointed Ombudsman in April 2003 and re-appointed in 2009.

For further information contact Mr. Paul Kenny, Pensions Ombudsman at (01) 647 1650, or see