Considering the “appeal” of ill-health retirement

We review the recent judgment in the case of Andrew v Royal Devon And Exeter NHS Foundation Trust [2022] EWHC 2992 (Ch) (28 November 2022) and set out the key takeaways for parties dealing with similar complaints relating to incorrect pension estimates

13 January 2023

On 28 November 2022, the High Court handed down an interesting judgment concerning an appeal from a Pensions Ombudsman Determination.[1] The Ombudsman had concluded that the claimant was not due any financial compensation for deciding to take ill-health retirement after receiving an incorrect estimate as to his pension entitlement. The question for the High Court was whether the Ombudsman had made an error of law in coming to this conclusion.

The background

Mr Andrew had been employed as a specialist orthotic technician by the Royal Devon and Exeter NHS Foundation Trust for many years. He unfortunately developed significant health problems which required him to take sick leave. In August 2017 he was considering taking ill-health retirement (“IHR”) and requested an estimate of his pension entitlement.

The estimate provided by the Trust indicated that he was entitled to a lump sum of £18,506.83 and an annual pension of £6,168.83 and was based on a pensionable pay of £31,229.17.

Mr Andrew did his calculations and worked out that if he retired on the basis of this estimate he would be receiving around £200 a month less than his current wages at the time. He came to the conclusion that, if he used the lump sum to pay off some debts, he would, in his words, “be able to just about survive”. Therefore, he opted to take IHR from 18 February 2018.

However, when he was sent the final calculation of his pension entitlement on 29 March 2018, he was shocked to read that his entitlement was in fact to a lump sum of only £11,629.14 and an annual pension of £3,876.38. It then transpired that the Trust had made an error in calculating the estimate of benefits and had based it on an incorrect figure for his pensionable pay, which should have been £19,650.94 rather than £31,229.17.

Complaint to the Ombudsman

Mr Andrew complained to the Pensions Ombudsman, seeking compensation for financial and non-financial loss. He argued that, had he been provided with the correct IHR estimate, he would not have opted to take IHR but would have stayed in employment until the age of 68. On this basis, he claimed the sum of £644,673.03.

The Ombudsman took issue with Mr Andrew’s argument that if he had received the correct figures he would not have sought Tier 1 IHR but would have continued to work. Given that the test for Tier 1 IHR was that Mr Andrew should be "permanently incapable of efficiently discharging the duties of [his] employment" the conundrum was how he could have satisfied that test on the one hand, yet been able to claim that he could continue to work in his current role on the other. The Ombudsman took the view that the two were incompatible in that qualification for the Tier 1 IHR undermined Mr Andrew’s argument that he would have carried on working. The Ombudsman held that Mr Andrew would have retired on around the same date irrespective of the erroneous estimate of his benefits and could not have continued working in his role until he was 68. He therefore awarded Mr Andrew £1,000 for “serious distress and inconvenience” but dismissed his very substantial claim for financial compensation.

The Ombudsman commented, however, that it was still open to Mr Andrew to apply for a different, part-time role in the NHS.

The Appeal

In giving his judgment, Mr Justice Zacaroli emphasised that there is no right of appeal against the Ombudsman's findings of fact. The only question on this appeal, therefore, was whether the Ombudsman made an error of law. In deciding what constitutes an “error of law” for these purposes, Mr Justice Zacaroli concluded that a self-misdirection on the facts, such as taking into account matters that were irrelevant, or failing to take into account matters which were relevant, would be capable of giving rise to an error of law.

There were two main grounds for appeal:

1. Reliance and causation: Firstly, did Mr Andrew rely on the incorrect IHR estimate to take IHR when he did? Secondly, would Mr Andrew have been dismissed from his role in any event because of his inability to work, such that the inaccurate IHR estimate caused no financial loss?

Mr Justice Zacaroli concluded that there was sufficient evidence for the Ombudman’s conclusion that, even if Mr Andrew had received a correct IHR estimate, due to the extent of his ill health, he would not have remained in his current employment beyond the date that he did in fact retire.

Mr Andrew also submitted that a connected error in law was the Ombudsman’s decision to determine these issues without an oral hearing. However, Mr Justice Zacaroli dismissed this argument finding it had been reasonable in the circumstances to decide the matter without an oral hearing.

2. Redeployment: Had the Ombudsman had erred in not properly considering the relevance of redeployment?

Mr Justice Zacaroli concluded that the Ombudsman had fallen into an error of law in rejecting the relevance of redeployment. Previous case law had shown that the duty to make reasonable adjustments was capable of extending to the placing of an employee in another post without a competitive interview, if that was reasonable in the circumstances. The Ombudsman had erred in not considering this. Also, had a correct IHR estimate been provided, Mr Andrew may have considered the option of redeployment, including through competitive application to other jobs, more thoroughly at that time. Therefore, the fact that Mr Andrew was still able to apply for another job competitively, as the Ombudsman had found, was not an answer to the question of whether any loss was caused to Mr Andrew flowing from the Trust’s error in providing an incorrect estimate in August 2017.

On this basis, the appeal was allowed and the matter was remitted to the Ombudsman for reconsideration.

This case is an important reminder of the difficulties that complaints about incorrect pension estimates present. On the one hand Mr Andrew’s claim to loss of almost £650K appeared wildly inflated but on the other, the Ombudsman’s handling of the claim was deficient. What matters is that, when considering the counter-factual in claims such as this, the parties should objectively consider all opportunities available to the claimant at the time of the event on a broad basis. Only if that is done can the real loss be identified. It must also be recognised that, provided the claimant’s arguments of taking a different course of action are realistic, the bar to establishing this will be a low one and oral evidence may not be necessary.

[1] Andrew v Royal Devon And Exeter NHS Foundation Trust [2022] EWHC 2992 (Ch) (28 November 2022)

Key contact

Justin Briggs

Justin Briggs Partner

  • Pensions Disputes
  • Trustees and Trust Companies
  • Professional Negligence

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