Some pension decisions are made at the discretion of a body connected to a scheme – for example, the trustees, the scheme’s managers or an employer.
Having discretion means, for example, that the body does not have to pay a benefit but can if it wishes to. Or it may mean that a benefit could be paid to one or more people – but the decision about who should receive it is for the body concerned.
Often the scheme’s formal documents will use words like “the trustees may decide” or “with the employer’s agreement” which show that there is a discretionary power. Typical examples are:
- whether benefits should be paid earlier than the normal retirement age
- if benefits should be reduced
- how death benefits should be distributed.
But whether there is discretion about such matters varies from scheme to scheme. So one scheme might say that if a person meets particular criteria they automatically get a pension early, whereas another might say that they only “may” be given a pension in similar circumstances in which case the decision is discretionary.
We will look to see if the discretionary powers have been applied consistently with the rules or regulations governing the scheme and any other relevant legislation.
We will decide whether a correct process was followed in arriving at the decision. We do not have to agree with the decision, just decide whether it was arrived at properly.
What we look at
We will look at the rules or regulations governing the scheme to see whether the discretion exists, who is supposed to exercise it and in what circumstances.
We will look at whether the decision maker has taken into account everything that is relevant (and nothing that isn’t) and reached a rational conclusion. That doesn’t necessarily mean that they have to decide what’s best for the person concerned, though.
For example, employers may be able to take their own interests into account (particularly where there are costs involved) and trustees may have to consider the interests of the pension scheme as a whole.
We may ask to see all of the information that the decision maker had at the time and any records of meetings where the matter was decided and other details considered in making the decision.
We will not take into account information that has only come to light after the decision was made – unless we think that the body concerned should have found it out earlier.
What happens if the complaint is upheld?
If we find that there was an error in the process, we will usually tell the body that made the original decision to consider the matter again.
We will tell them to disregard any steps they may have already taken, such as deciding to pay money to another person (and in such circumstances our decision will not affect that person’s position).
We would not usually substitute our own decision for one that has already been made.