Royal Mail Pension Plan (PO-86)

 Subject

In 1996 Mr Cunningham began making additional contributions from his salary to purchase nine additional years in the Plan. In 2000 he transferred to another employer in the group without a break in pensionable service. However, when his payroll record was set up at his new employer they did not arrange for the deduction of the additional service contributions. In 2012, the Plan informed Mr Cunningham that he had not made any contributions towards his additional service for 12 years and that if he wished to retain the related benefits he would have to make up the shortfall of £17,474 in employee contributions. Mr Cunningham has complained that it is unfair to have to pay these arrears of contributions or suffer a reduction in the value of the pension he was expecting.

The Pensions Ombudsman’s determination and short reasons

The complaint should be upheld against Royal Mail and the Trustee because they failed to set up the payroll records correctly in 2000, then failed to collect the additional contributions or advise Mr Cunningham of the non-payment of contributions when the mistake was discovered in 2003. He also received a series of benefit statements showing incorrect accrual on which he relied for his financial planning. By the time the errors were brought to his attention Mr Cunningham had changed his position irreversibly, had less than 10 years to his normal retirement age, and could no long afford to fund future accrual as well as arrears. To the extent that he has lost his intended accrual he should be compensated.