Railways Pension Scheme (PO-18996)

Ombudsman’s Determination

Outcome

I do not uphold Mr N’s complaint and no further action is required by the Trustee.

My reasons for reaching this decision are explained in more detail below.

Complaint summary

Mr N is unhappy that he has not received his Railways Pension Scheme 1994 Pensioner Section (RPS) benefits in line with the preferential, Schedule 8 terms. He has also complained about the lack of information that was provided when the Trustee wrote to him to discuss the possibility of amalgamating his former RPS rights.

Between 1979 and 1995 Mr N worked for British Rail. During this period, he accrued just over 15 years pensionable service with the RPS.  In 1995, Mr N was made redundant by British Rail.

In 2002, Mr N joined Network Rail and became a member of the Railways Pension Scheme Network Rail Section (NRS).

On 21 October 2002, the Trustee wrote to Mr N about transferring his RPS benefits into the NRS. Mr N did not transfer his benefits because the predicted figures for the combined benefits were less than the prediction for keeping them separate.

Mr N was made redundant in 2014. Rule 11A of both the RPS and NRS (see Appendix) allow Members to receive benefits prior to their Normal Pension Age (NPA), but not earlier than Normal Minimum Retirement Age (NMRA).  In 2014 the NMRA was 55; however, Mr N’s NMRA was protected at 50.  Because Mr N relied on his protected NMRA the payment of his benefits was also subject to Paragraph 22(7)(a) and 23(7) of Schedule 36 the Finance Act 2004 (see Appendix) which stipulates that all benefits in a scheme must be paid at the same time.

Under the rules of the RPS and NRS, a member who retires early shall be subject to a reduction for early payment of their retirement benefits. However, there are two possible bases for calculating the reduction, on ‘such basis as is determined by the Trustee having considered the advice of the Actuary’ or ‘Schedule 8’ terms. Schedule 8 terms provide better retirement factors when calculating early retirement than would otherwise be the case.

Rule 11A of the NRS says that Members are eligible to take benefits with Schedule 8 terms if they elect to receive their benefits immediately upon leaving pensionable service. Otherwise, the agreement of the Trustee would be required for Schedule 8 terms to be applied.  With this in mind, Mr N elected to receive his benefits immediately.

On 8 January 2015, Mr N received confirmation that his NRS benefits would be calculated with Schedule 8 terms. However, he was told that he needed to apply to the Trustee to get his preserved RPS benefits put into payment and invited to submit supporting information in respect of his application to receive them on Schedule 8 terms.  It was at this point that Mr N was told that benefits from both sections of the Scheme needed to be paid together.

On 12 January 2015, Mr N wrote to the Trustee and applied for his RPS benefits to be calculated with Schedule 8 terms. The Trustee declined and paid the RPS benefits on a cost neutral basis.

On 8 November 2015, Mr N acknowledged that he was physically and mentally capable of work, but he had been unable to secure employment for a “significant period”.

A series of correspondence followed and, on 10 September 2016, Mr N appealed the Trustee’s decision to pay his RPS benefits on cost neutral terms. Mr N felt that his RPS benefits should be paid on preferential terms because: –

In order to take his NRS benefits using Schedule 8 terms, without requiring Trustee consent, he had to take his benefits immediately. He also had to take his RPS benefits at the same time.  Mr N contends that this forced him to take his RPS benefits at a reduced rate.

He did not leave Network Rail voluntarily, he left due to compulsory redundancy. Because Mr N was under his NPA, he has been forced to retire with reductions to his Scheme benefits.

His entitlement to Schedule 8 terms was not assessed correctly.

The Trustee instructed a Committee to consider Mr N’s appeal. On 22 May 2017, the Trustee wrote to Mr N to decline early payment of his RPS benefits using preferential reduction factors.  The Committee commented that it did not feel Mr N’s circumstances were exceptional.

On 30 June 2017, the Trustee wrote to Mr N regarding his RPS benefits. The letter stated that had Mr N’s RPS benefits been paid on the Schedule 8 factors his lump sum would have been £58,921.67 instead of £49,108.11.  His annual pension would have been £8,838.25 rather than £7,366.19.

On 29 September 2017, Mr N, through his solicitor, raised some further complaint points. Mr N said that the transfer option information supplied by the Trustee on 21 October 2002 was incomplete. Mr N said that, had he been provided with the full information, he would have transferred his RPS benefits into the NRS.  His solicitor also sought to draw attention to Scally v Southern Health and Social Services Board (Scally) and the Deputy Pension Ombudsman’s determination in the case PO-1334.

On 3 January 2018, the Trustee responded to Mr N’s complaint. It said that it had received legal advice that stated that each application must be considered on its own merits, but it had to temper this with the, “issues and circumstances of the Section as a whole.”  The Trustee clarified it would continue to apply cost neutral early retirement factors, unless in cases of exceptional circumstances.

Mr N, through his solicitors, wrote to us on 24 January 2018. They said that the legal advice the Committee relied on should be produced as evidence.