Late payment of pension and lump sum 1

United Kingdom

Reference: K00508

In March 1999 a member was told that he was going to be made redundant. It was agreed his employment would terminate with effect from 20 June 1999. He was entitled to receive immediate early retirement benefits and had been given an estimate. He wrote to the administrators on 17 June confirming that he wished to take his pension and maximum lump sum from 21 June. The first instalment of pension should have been paid on 30 June but on 30 July the administrators wrote to the member enclosing his pension instalments for July and August and his lump sum. Nothing had been added by way of interest for late payment and the scheme rules contained no provisions on payment of interest. The member claimed interest for late payment at the rate of 10 per cent.

The Ombudsman held it was "inequitable for the Scheme Rules to contain no provisions which protect members from injustice resulting from delays in payment of their benefits". In addition, although there was no provision on when the lump sum became payable, the Ombudsman said that "it should be a matter of good faith for the trustees to regard the lump sum as equivalent to the pension" and treat the same payment provisions as applying to it. The Ombudsman awarded interest on the lump sum from 21 June to 4 August at base rate and simple rather than compound. He awarded similar interest on the pension payments, but only from 30 June.