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Complaint Topic: Other, Transfers
Outcome: Not upheld
Type: Pension complaint or dispute

In March 2016, the Tata Steel Group announced that it had begun a portfolio restructuring exercise and that it had started to investigate the possibility of selling Tata Steel UK (TSUK), the principal sponsoring employer of the Old British Steel Pension Scheme (OBSPS). The OBSPS’ future was therefore uncertain and its entry into the Pension Protection Fund (PPF) seemed likely. The trustee of the OBSPS (the Trustee) issued a series of announcements to members of the OBSPS throughout the course of discussions and negotiations concerning the OBSPS’ future, to update members on the situation as it unfolded.

In March 2017, as the OBSPS’ future had become less uncertain, a new statement of investment principles was adopted, to reflect de-risking changes that had been made to the OBSPS’ investment strategy. Having considered actuarial advice, the Trustee made the decision to adopt a new basis for calculating cash equivalent transfer values (CETVs) payable to members who chose to transfer their benefits out of the OBSPS, with effect from 1 April 2017. CETVs calculated on the new, post-1 April 2017 basis were, in many cases, significantly higher than those calculated on the pre-1 April 2017 basis.

These changes to the CETV calculation basis also affected the early retirement factors (ERF) that were applied when deferred members started to take their pension benefits before reaching their normal retirement date. This meant that members who took early retirement from deferment after the changes had been implemented generally received more generous benefits than they would have done had ERFs been applied on the previous basis.

We received complaints from 233 members of the OBSPS that:

  • the Trustee’s communications concerning the OBSPS’ future scared them into transferring out of the OBSPS, or taking early retirement sooner than they might otherwise have done
  • the Trustee should have changed the calculation basis earlier and been more open with members about this
  • and the pre-1 April 2017 basis was incorrect.

We categorised these complaints into four main groups, each with its own lead case (those relating to Mr A, Mr G, Mr D and Mr S), according to: whether the complainant had taken a CETV or early retirement; and, if they had taken a CETV, when they did so in relation to the timing of the Trustee’s decision to adopt the new CETV calculation basis.

In his Determination for each of the lead cases, the Ombudsman found that:

  • the Trustee’s communications concerning the OBSPS’ future were not misleading (and were not intended by the Trustee to be so) and did not amount to scaremongering
  • setting ERFs and/or CETV factors is a matter for the Trustee, in respect of which the Trustee obtained and considered actuarial advice
  • the Trustee obtained and considered appropriate advice from suitable parties in order to reach its decisions in respect of: the OBSPS and its future; the OBSPS’ statement of investment principles; and changes to the CETV methodology and ERFs
  • the Trustee acted reasonably in using the ERFs and/or CETV calculation methodology that applied at the relevant time; and subsequent changes to the methodology should not be applied retrospectively.

Thirty nine cases from across the four groups have been identified as having potential distinguishable features from their respective lead cases, and these cases remain open. All other group cases were materially similar to the lead cases and have been closed, on the basis that the Ombudsman has determined the lead cases and not upheld them.

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