Recent determinations of the Pensions Ombudsman¹ have considered the extent to which employers should provide information on pension rights to employees who have notified them of a terminal illness.
The law
There is no general duty on employers to advise employees about their pension rights, or to safeguard employees’ economic well-being. Indeed, the law prohibits anyone other than a person authorised by the Financial Conduct Authority from advising on pension rights.
However, a distinction should be drawn between “advising” and “providing information”. In some situations the law imposes specific duties on employers to provide information about pension rights to employees. When the law is silent, however, getting things right can be tricky.
Good practice
For employees with terminal illness, there are likely to be different options available under their pension scheme that impact the overall amount of benefits payable. To make a decision that is right for them, the member will need to have all relevant information to hand. Often, timing of any decision they make will also be critical.
As a matter of law, the fact that an employee is terminally ill does not in itself give rise to a heightened duty of disclosure on the part of the employer. Nevertheless, in recent determinations the Pensions Ombudsman has considered the extent to which an employer should, as a matter of good practice, provide a terminally ill employee with information about their pension rights.
Pensions Ombudsman decisions
The Pensions Ombudsman accepts that, on learning of an employee’s terminal illness, there is no general duty on employers to provide the employee with information on which retirement option would be the most financially advantageous in their circumstances. However the determinations indicate that, to follow good practice, employers should:
- Deal with any queries from the employee about their retirement options and benefits quickly, taking into consideration the fact that the employee may have limited pensions knowledge and be preoccupied with their health.
- Where possible, provide the employee with information on the pension scheme’s benefit structure (for example, by providing a copy of the scheme booklet).
- Suggest that the employee seeks independent financial advice before making their decision.
- Make decisions on the employee’s ill-health retirement application without delay and, on approving the application, set the retirement date as early as possible.
- If before the retirement date the employee’s condition deteriorates, consider giving the employee an option to bring forward their retirement date.
A determination of the Pensions Ombudsman only binds the parties to the dispute, and does not create a binding precedent. However, it seems clear that in terminal ill health cases the Ombudsman is prepared to closely scrutinise actions taken by the employer.
¹ Mrs T PO-19080, Mrs L PO-18412 & PO-18521, The Estate of Mr Y PO-13540, Estate of the late Mrs N PO-19673