Pensions Ombudsman: Mr H (CAS-50353-Y4X5) - member succeeds in claim against employer which failed to provide contractual "mirror benefits" in new scheme

The Pensions Ombudsman has upheld a complaint brought by a former employee who argued that the scheme trustee and new employer had failed to provide "mirror benefits" as promised.

The member has originally been granted "special terms" under a previous scheme. Increases to his pension in payment, including the part in excess of the guaranteed minimum pension (GMP) after state pension age, would increase by the lesser of RPI or 5 per cent. In 1998, the member transferred to a new scheme after receiving assurances from the new employer that his new benefits would "mirror" those of the previous scheme. However, the promised benefits were never properly documented and subsequent increases to his pension were applied incorrectly. In addition, the trustee decided to end all future increases to pensions in payment from May 2017 after being advised that the new scheme had not been administered according to the rules.

In his complaint, the member claimed that he was entitled to pension increases as per the original promise of mirrored benefits. However, the trustee and the new employer asserted that no valid amendments were made to the scheme rules to provide such benefits and that such increases had been discretionary.

On possible defences, the Ombudsman held that a claim for specific performance was not subject to the six-year limitation period. The defence of estoppel by convention also applied as there had been an agreed common assumption between the parties.

There was a binding contractual agreement between the new employer and the member to provide benefits that mirrored the special terms, including pension increases, and to document the promised benefits. By failing to uphold this contractual obligation, the employer had acted in breach of the Imperial duty of good faith. Similarly, the trustee's failure to award increases in accordance with the special terms amounted to a breach of trust.

The new employer was directed to amend the scheme rules or augment the member's benefits to reflect the promised mirror benefits, and to pay him £1,000 for the serious distress and inconvenience caused by its maladministration. The trustee was ordered to pay the member any arrears of pension and commutation lump sum, with interest.