What would be fair compensation for a VERY late pension in payment?

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oopsbuddy

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A man aged 79 received a letter from a UK pension company advising him that they should have paid him a pension from his 65th birthday, but hadn't, and that he should contact them to arrange for payment. He had not changed address but had never received any correspondence from the pension company. The value of the pension at his 65th birthday had been calculated, and interest of 3% p.a. had been added since that date. What additional compensation, if any, should he be entitled to?

By way of background info, many years earlier he claims that he had a recollection that he had set up a pension (one of several) many years earlier, through his company, but his company had since folded, and he could find no policy document (he may never have received one from the broker, who had also since gone out of business). He could not find any trace of the pension company either to contact them (the company had changed ownership - and name - several times in the intervening years) and had assumed (naiively) that there was nothing to look for anymore.
 
Might be worth flagging the issue with the relevant financial regulator e.g. UK FSA or relevant ombudsman I presume assuming that it's not within the remit of IFSRA or the FSO?
 
Growth of average Irish Managed Pension fund over the past 15 years was +9.5% per annum. I'd be inclined to research what either this fund or the average UK Managed Pension Fund did over the 14 years in question, and look for that.

The good thing for your 79 year old is that if he's buying an annuity, he'll get a much better rate at 79 that he would have at 65.
 
I wonder is it an 'Irish' ombudsman case or a 'UK' case? Irish company set up the pension for an Irish resident scheme member through an Irish broker, but pension company is UK based and all administration (including a lack of correspondence) is done in the UK. I know an enquiry on that point costs nothing, but there is a reluctance to file a complaint with either ombudsman in order to start an investigation, which could drag on a very long time and with possibly little benefit, and the policyholder's preference is to take the path of least resistance and try and negotiate something with the pension company instead.
 
I'm not sure whether it's a UK or Irish case. Perhaps the Pensions Board can advise? Wonder if it would be worth getting an independent, professional advisor in on the act in an advisory capacity perhaps on a fixed fee basis? Were the trustees of the scheme Irish? I would have assumed that they would bear some responsibility in a case such as this?
 
LDFerguson said:
The good thing for your 79 year old is that if he's buying an annuity, he'll get a much better rate at 79 that he would have at 65.
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However he has missed out on the benefit of having any payments over the 14 years, so life expectancy is reduced (he is not in good health either) and with it the risk for the pension company of the annuitant 'doing well' out of the policy.

Another difficulty is that although he has no policy document, the pension company has also admitted that despite their best efforts, they can not produce a copy of his policy document either (even though they have confirmed he has a policy and has now opened correspondence and confirmed a valuation) so we cannot confirm what fund/s the policy ws invested in. It is possible, and I have asked, that there might have been a guaranteed annuity rate attached, which was not uncommon in policies taken out at that time. However they cannot confirm this!

We have also managed to get Revenue approval for the policy so that he has a 25% Tax Free Cash option, and can pay the balance into an existing ARF, which I think he would prefer to do.
 
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Sorry, some posts crossing here. The Trustee was the company/employer, which no longer exists. To its credit, the pension company many years ago credited the policy to the individual's name, when they could get no adequate (or any) response from either the company or the broker, as both had disappeared, which seemed reasonable. But this adds to the case for asking why no correspondence was then issued to the individual when the policy matured, as the company had since been taken out of the loop, and the individual's address had not changed.
 
oopsbuddy said:
To its credit, the pension company many years ago credited the policy to the individual's name
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What does this mean? Was it effectively or actually a transfer to a buy out bond? Are the trustees definitely out of the picture here? The fact that the company no longer exists doesn't in itself mean that the trustees have no responsibilities here. The roles of pension scheme trustee and company officer distinct as far as I know.
 
I will post the actual wording of the pension company's explanation of this process later, but in essence, as they could get no response from the company/employer, or the broker, in order to complete the Revenue approval process required for the establishment of an occupational scheme, and I have to accept that they probably did try for quite some time, with the Revenue's approval at the time they 'converted' the scheme to an individual pension, so that they could close their files on this case (until maturity). That took the company (which was also the Trustee) out of the picture, so all future correspondence could be directly with the individual....but there was no further correspondence until recently! So the issue of trustees is not applicable here.

I should also add that when I say 'close their files', there were no annual benefit statements issued or any other correspondence from the pension company from the early 1980s until recently.
 
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oopsbuddy said:
I should also add that when I say 'close their files', there were no annual benefit statements issued or any other correspondence from the pension company from the early 1980s until recently.
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Unfortunately pension providers are under no obligation to issue regular/annual statements to holders of paid up pension funds (e.g. former employees who left their money in the occupational scheme) and most don't. Not sure if this applies here?

It seems bizarre that nobody seems to have been able to contact the individual in this case especially if they never moved house.

Just to clarify - I was not suggesting that going to a regulatory authority was the first or only option. If the individual wants to negotiate directly then that's his prerogative but he probably should do so with the benefit of independent, professional advice. If it did come to making a formal complaint then don't assume that it will necessarily be a long drawn out, complicated or pointless affair. If the FSO are involved then they are pretty good at expediting matters as far a I know.
 
The wording they used when explaining the history of the set-up of the pension was: "In the absence of a Declaration of Trust (as I said they did try to get the Revenue approval documentation finalised for the scheme, but could not get satisfactory responses at the time (late 1970s)) we wrote the policy in the name of the individual on a non-commutable basis and that no OMO (OPen Market Option) would be available. The Revenue agreed and the Revenue closed their files."

It is indeed bizarre that they did not write to him for 14 years after the policy matured, but then wrote to him at his original address on their files, and found him straight away!

On the regulatory option, the pension company did invite him from the outset to file a complaint if he wished, as that is his choice, and other than the compensation issue they have been very helpful, but during subsequent discussions when they were 'invited' to come up with a proposal to adequately compensate him for not paying him for 14 years, they advised that in their experience, ombudsman awards for cases such as this often produced only a nominal award of maybe £50STG. They also expressed gratitude for being given the opportunity to look at the case again without a complaint being filed, but all sides are aware that we can go down that road if necessary.

Anyway, that's the mechanics of it all! One offer of €500 has been rejected. A second offer just doesn't make sense and we have requested clarification of it.

I wondered if there was a view on what would be deemed to be acceptable in the circumstances. Would it be in order to INSIST that compensation along the lines of Liam's earlier post be offered, or would the average annual CPI or inflation rate be a better guide?

Thanks for the views.
 
From your posts I gather it was a defined contribution arrangement orginally, not defined benefit.

Was the fund left invested until age 79 and then converted into annuity at current rates, or did they adjust the annuity rate in some way?


If they used current annuity rates, I would firstly look for a comparison of the pension that he would have got if the fund value at age 65 was converted at the annuity rates applicable then (on the same pension increases/ spouses options he is currently getting), increase this up with the pension increases ( if any) that would have applied, add the backdated pension he would have received and compare this to the pension offered now.

Annuity Rates 14 years would have been far more generous than those offered today particularly with regards to the underlying mortality assumptions, this may have been offset to some extent by the investment return he was given.

For a compensation figure, when I worked in the UK the minimum offer would have been the interest rate that the Revenue use for calculating arrears, it should be a bit higher than inflation over the period, but definitely would be more than 3% per annum over that period.
 
Sorry for delay in coming back. They have not advised if there was any guaranteed annuity rate attaching to the policy. They cannot even provide a copy of the policy, so we do not know what funds or assets the policy was invested in. They have advised the policy value at age 65, and increased this by 3% p.a. over the intervening years.

At first, they declined to offer any compensation, which was challenged. Then they offered an amount of a few hundred euros, which was declined. They have now 'calculated' what annuity pension payments he would have received from age 65 to a date 11 months ago, added them together and offered this as an 'enhanced' current fund value. Although this is all going in the right direction, this has also been challenged, as it doesn't take into account the discounted current value of income received now, but which was due 14, then 13, then 12 etc, years ago. Also, why only count pension up to a year ago, and not include the last 11 months too? The longer this goes on, the more anger it generates, but I suspect that eventually, an amount will be agreed just to end the saga.

What I really wondered was what should be a realistic expectation of compensation in a case such as this. There are clearly many possible ways of calculating what could be requested/demanded, but what is the most likely outcome? The pension company is clearly at fault, and has been for 14 years, and has been made to give improved offers, but where should this be agreed?
 
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