An Employee’s Retirement Date Should Have Been Brought Forward to Maximise His Death Benefits

The Deputy Pensions Ombudsman has upheld a complaint where an employer failed to bring forward a member’s retirement date before his death.

Mr Y was diagnosed with a form of aggressive cancer and underwent chemotherapy. He was recommended by a counsellor appointed by his employer for early retirement on grounds of permanent ill-health.

Mr Y would have become a retired member at the end of his notice period on 17 August 2013.  Sadly, on 24 July 2013, Mr and Mrs Y were informed that Mr Y’s cancer had spread and his diagnosis was terminal. Mrs Y telephoned the employer on Mr Y’s behalf. The issues discussed during this conversation were disputed at trial. Mrs Y claimed that she informed the employer about Mr Y’s deteriorating health and asked that his lump sum/pension benefits could be brought forward so they could fulfil some of his wishes, but the employer refused. The employer claimed that Mrs Y had simply asked to withdraw part of her husband’s pension for a holiday which was to take place before Mr Y underwent further treatment.

Unfortunately, Mr Y passed away on 14 August 2013, three days before his early retirement pension was due to come into payment. As Mr Y died whilst in service, Mrs Y was denied access to a larger death grant in addition to a retirement grant of up to £45,557 and was considerably worse off, financially. Mrs Y therefore made a complaint to the Pensions Ombudsman.

The Pensions Ombudsman upheld Mrs Y’s complaint preferring her version of events. As Mrs Y had called Mr Y’s employer the same day that they had received the news that Mr Y’s condition was terminal, and had made the employer aware of this and sought access to his pension, it was held that the employer should have realised the circumstances surrounding Mrs Y’s request.  It was held that the employer should have enquired as to whether Mr and Mrs Y wished to waive the remaining notice period in order to get access to the money, even if Mrs Y had not specifically worded the request as such.

The Deputy Ombudsman ordered the employer to calculate and pay the difference between the death benefits paid to Mrs Y to date, and those Mr Y and Mrs Y would have received had Mr Y’s service been terminated two days after the telephone conversation.

This decision appears to suggest a widening of the duty to advise employees and their dependants on the financial impact of their decisions in taking pension benefits in exceptional circumstances.

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