UK - The pensions ombudsman has been told to cap compensation paid to scheme members for "distress" caused by maladministration at £1000.
The High Court judge set the limit when East Sussex County Council appealed against the ombudsman’s decision to award a scheme member £3000 a year – part of which included stress and inconvenience.
The court said the ombudsman, David Laverick, had not indicated how he came up with the figure and that the way it was calculated did not correspond with “any measure of loss known to the law”.
The court said the debate on whether the ombudsman should make awards for distress was still open and until it had been resolved, compensation should be capped at £1000. It also said the ombudsman should review how he made his calculations.
The award was made after a former East Sussex employee, Barbara Jacobs, told the ombudsman her decision to take early retirement was based on incorrect figures on her pension statement.
The error, which gave her a higher pension than she had accrued, did not come to light until seven months after she retired.
The ombudsman directed the council to pay Mrs Jacobs the overstated payments – £3000 a year – on top of her accrued benefits.
But the High Court agreed with the council that the ombudsman should not have placed Mrs Jacobs in a better financial position than she would have been if there had been no mistake. It also said the damages were not in keeping with the average of £200 in total for similar cases.
Linklaters partner Mark Blyth (pictured) said the court’s ruling would lead to a very significant change to the current practice of the ombudsman.
Blyth said Laverick often appeared to “pluck a figure out of the air and there seems to be no apparent rationale for why he decides to give an inconvenience and distress payment. This ruling means he may not be able to do it in the future”.
The ombudsman declined to comment on the decision.
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