Strathclyde to pay damages after pension advice shortfall

Strathclyde Pension Fund has been ordered to pay compensation to a scheme member after failing to provide a correct pension projection.

The fund, one of the largest local authority pension funds in the UK, pays pension benefits on behalf of the Local Government Pension Scheme (LGPS).

This case involves Mr I Sheach, who had been part of the LGPS since 1979 and applied for voluntary redundancy from North Lanarkshire Council after 29 years' service.

His application was granted, and Sheach was entitled to a redundancy payment as well as a final salary pension. Under the Local Government Regulations 1998, Sheach was also entitled to compensatory added years (CAYs) on his pension as part of the redundancy deal.

Strathclyde provided a projection of what Sheach was entitled to in January 2008, taking into account his redundancy payment and pension.

However, the Pensions Ombudsman Tony King ruled Strathclyde failed to properly inform Sheach that transferring his stakeholder pension pot, held with Aviva, would reduce his CAYs and have a detrimental effect on his income.

Sheach complained he would not have consolidated his savings if he had known this in advance.

Strathclyde said it was questionable as to whether it had responsibility for advising members on how to maximise compensation payouts.

It said: "It is for a member to take their own financial advice prior to reaching a decision to transfer."

However King determined Strathclyde, after receiving inquiries from Sheach about transferring his stakeholder into the LGPS, was the only party able to inform him of the difference a transfer would make and failed to do so.

King ordered Strathclyde to increase Sheach's pension by £235 per year, with backdated interest, and pay him £100 in compensation for the distress caused.