Disclaimers aren’t a “get out of jail free card”: Trustees alerted by TPO

A recent Pensions Ombudsman’s (TPO) decision (determination CAS-63587-P0K4) highlights the risks for trustees and administrators when members rely on inaccurate benefit statements. 

This decision emphasises that disclaimers may not shield administrators from liability where members are given express reassurances about their benefits and suffer financial loss as a result.

Background: what happened?

Mr E, a member of the Teachers’ Pension Scheme (TPS), received multiple Estimates of Benefit (EOB) statements over several years. An inaccurate EOB statement was issued on 9 February 2014 and showed an inflated period of pensionable service which increased Mr E’s benefits. In March 2014, Mr E queried the extra 5 years' pensionable service with TPS’s administrator (TP), and was expressly reassured by call handlers that the figures were correct. 

Relying on these reassurances and subsequent statements by TP, Mr E made significant life decisions, including taking early retirement and making mortgage commitments. In 2020, Mr E applied for an actuarially reduced early retirement pension and, in doing so, discovered that his pensionable service had been overstated due to an error in TP’s computer system, resulting in a lower pension than Mr E had anticipated.

Key findings from the Pensions Ombudsman and the role of disclaimers

TP acknowledged that the EOB statements were incorrect but argued that the disclaimers included in the EOB statements were sufficient to negate any liability. The disclaimers stated that figures were “for illustration only and does not give you entitlement to the retirement benefits quoted”. However, TPO determined that disclaimers of liability in EOB statements, while relevant, are not always a “get out of jail free card”.  Where administrators give explicit assurances and members rely on those assurances to their financial detriment, the administrators may still be liable. 

In this case, TPO found that TP, by the assurances given to Mr E over the phone, had assumed responsibility for Mr E’s reliance on the EOB statement and overrode the general disclaimer.

This determination emphasises that scheme administrators and trustees (or scheme managers) owe a duty of care to provide accurate information and to exercise reasonable skill in administering their schemes. Disclaimers do not automatically override this duty, especially when administrators assume responsibility through their actions or statements. 

Compensation 

As a result of the maladministration which TPO found to have occurred, and Mr E’s reasonable reliance on the inaccurate statements, TPO awarded Mr E financial compensation. This was calculated to put Mr E in the position he would have been in had the misstatement not occurred, including salary, pension accrual, and housing benefits. 

TP was directed to pay 80% of the calculated loss, the 20% deduction accounting for a net tax position, plus an additional sum of £1,000 “in recognition of the serious level of distress and inconvenience” Mr E had suffered, in particular as a result of the disruption to his retirement planning.

In practice 

This determination is a clear reminder: disclaimers in benefit statements are not a “get out of jail free card”. They form just one part of a wider risk management strategy, rather than the sole line of defence. So, whilst disclaimers are useful, they should not be relied upon as a blanket protection against liability for inaccurate statements. Explicit reassurances or conduct that encourages reliance can override the general disclaimers included in benefit statements.

What should trustees, scheme managers and administrators do now?

• Review your processes: Make sure robust checks are in place to ensure the accuracy of benefit statements.
• Revisit disclaimers and be clear about their limited use: Ensure any disclaimers are clear but be aware that they are not foolproof. Consider how staff interactions may impact their effectiveness.
• Train staff: Make sure all communications with members are accurate and escalate appropriately, especially when queries arise. Take member concerns seriously and investigate thoroughly before providing reassurances. 

This article was written by Caius Mills and Will Cadbury. If you have any questions or would like to discuss any of the issues raised, please do get in touch.