FT Adviser (16/08/2019) – About 120 schemes administered by Prudential have been informed that their members could be receiving wrong pension payments, after incorrect calculations were identified in connection with a thirty year old legal case.
FTAdviser can reveal that the trustees of these defined benefit pension funds have been advised by The Pensions Regulator to speak to their legal and actuarial advisers, after Prudential informed the watchdog of the potential errors.
Members who have been affected by this mistake could be in line for a pension uplift of 25 per cent in some cases, but there is also the chance that the error resulted in overpayments.
A spokesperson at Prudential UK said the provider has identified DB schemes “where incorrect calculations may have been made to members’ benefits when schemes attempted to equalise benefits after the Barber judgment”.
The issue was discovered following a routine review of pensions payments, the spokesperson said, and Prudential is contacting trustees of affected schemes to raise its concerns and determine what actions, if any, need to be taken.
A spokesperson at TPR told FTAdviser its officials had “written to trustees and managers of approximately 120 schemes to make them aware that members may have had incorrect pension calculations,” which has been confirmed by Prudential.
In the Barber case almost 30 years ago, the European Court of Justice decided that the right to equal pay for men and women applied to occupational pension schemes, which meant men and women had to be given the same retirement age.
Until then, it was normal practice in the UK to have unequal retirement ages between male and female members, typically age 65 for men and 60 for women.
The court ruling dictated that for any period of pensionable service prior to May 17, 1990, equalisation of pension ages was not required.
But schemes had to set a date for equalisation and until that date came into effect, pension rights were gradually levelled up, in what it was called the Barber window.
This meant that disadvantaged members were entitled to more favourable treatment, which generally meant that male members were entitled to a lower retirement age.
Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, said that financial advisers should check to see if their clients have been disadvantaged because of the incorrect calculations by Prudential, though this may not be immediately obvious as the provider was just the administrator of the schemes.
He said: “Also, it could be that some members have transferred these benefits away already, have passed away, or were simply disadvantaged by a later retirement age, so this could complicate matters. Either way, they’d likely be due compensation from the scheme and Prudential to make up for the shortfall. Overall, it should mean that members finally receive their fair share of retirement benefits after the court ruling in the 1990s.
“I’d hope that Prudential is able to proactively identify and contact the members likely to be affected as soon as possible and compensate those that have lost out.”
Full article link: https://www.ftadviser.com/pensions/2019/08/16/regulator-warns-of-widespread-pension-calculation-errors/