In Mr Y (CAS-44123-K4V8) the Deputy Pensions Ombudsman has dismissed a complaint by a member regarding the employer's failure to inform him about the tax implications of paying part of his redundancy payment into the pension scheme in the form of AVCs.
The member left employment after taking voluntary redundancy. Following a conversation with the company's pensions department about his options, he decided to pay the taxable element of his redundancy payment into the pension scheme as an AVC.
Having signed a declaration confirming he had obtained financial advice, he then opted to take the AVC as an uncrystallised funds pension lump sum (UFPLS), which triggered the money purchase annual allowance (MPAA). The member was subsequently informed that he would need to take his scheme benefits at the same time as his AVCs since he was taking his benefits before age 55 with a protected pension age of 50.
The member complained that he was not told that taking his AVC would trigger the MPAA or that if he took his AVC benefits he would also need to take his main scheme benefits. Had he known about the MPAA, he would not have paid the redundancy payment into the scheme.
The Deputy Ombudsman rejected the complaint on the basis that the MPAA related to a member's individual tax considerations and operated outside the scheme's rules. The Deputy Ombudsman concluded that finding a duty on the employer in these circumstances would "widen considerably" the scope of the employer's implied duty as determined by the House of Lords in Scally v Southern Health and Social Services Board [1992]. In addition, the member had been given the chance to return the UFPLS and select an alternative AVC option which would not trigger the MPAA. As the member had seemingly received financial advice and continued to select the option of taking a UFPLS in full knowledge that the MPAA would be triggered, the Deputy Ombudsman concluded that none of the respondents could be held responsible for the financial loss incurred as a result.
