Royal Heritage Life Assurance v Pensions Ombudsman 2

Reference: (1997) OPLR 171

Royal Heritage acted as manager of and issued two insurance policies to provide benefits under the Scheme to each of the members. One of the members subsequently moved to a new employer and requested a transfer payment to the new employer's scheme. The transfer payment was made, but the amount was for GBP 62,890 less than the policy value. The member could have requested that the policy was assigned to the new scheme but did not. The member complained.

The Ombudsman held that Royal Heritage was not entitled to make the deduction and directed that the member be paid the full amount of the policy value with interest. Royal Heritage appealed.

In overturning the Ombudsman's determination, the Court held that the rights of the members were to be determined in accordance with the Scheme rules. The Scheme rules and the policy needed to be read together in such a way as to make sense of the whole. The fact that the policy was effected to provide benefits under the Scheme did not mean that it was subordinate to the rules of the Scheme. The reference in the Scheme transfer rule to the "full proceeds of the policies" did not therefore necessarily mean the member was entitled to the unreduced value of their fund. The relevant provision in the policy talked about using the surrender value of the member’s fund to secure benefits before normal retirement date. In the view of the Ombudsman, securing benefits could only refer to benefits which were coming into immediate payment and therefore the provision was not relevant here, the Court disagreed.