Investment of AVCs 2

Reference: L00195

Mrs Lambeth complained that the trustee of the University of York Pension Fund and her employer, the University of York, failed to monitor the Fund’s AVC investment performance as closely as was necessary to take action when the interest rates offered were suddenly and substantially reduced. Mrs Lambeth commenced paying AVCs to Northern Rock on 11 March 1985. On 25 October 2000 she wrote to the University’s pensions manager, expressing concern about the interest rates offered from 1 June 1998 to 30 November 1999. She explained that she believed the interest from other providers had increased over the same period.

The Ombudsman found that there was not proper monitoring of the AVC investment by the trustee’s staff. He found that this amounted to maladministration. The fact that Northern Rock’s interest rates had become uncompetitive should have been noticed. Had the performance been properly monitored, concern would have first been raised in December 1999 and a further review in December 2000 would have shown no improvement so that there was a strong possibility that a change of AVC provider would have resulted in mid-2001, but no action would have been taken faster than it actually was. Therefore, the Ombudsman found that Mrs Lambeth did not suffer any financial loss due to the maladministration.

He further continued by finding that as a matter of good administrative practice the trustee should have provided Mrs Lambeth with copies of Northern Rock’s notifications of interest rate changes as and when they occurred. The failure to do this was maladministration.