Legal & General Assurance Society Ltd v CCA Stationery Ltd

The Pensions Ombudsman’s jurisdiction is confined to maladministration in the management or administration of a pension scheme. It does not extend to commercial activities undertaken by an insurer in operating a wider long-term fund, even where those activities affect the value of a scheme policy. The setting of fund-wide valuation factors was therefore outside the Ombudsman’s remit. The subsequent calculation of a surrender value, made after the insurer had ceased to administer the scheme, was also a commercial transaction rather than maladministration. The Ombudsman’s remedial powers cannot exceed those of a court. He cannot delegate his fact-finding function to an actuary appointed by a third party or impose an ineffective and uncontrolled expert determination.

Legal & General appealed against a determination of the Pensions Ombudsman concerning the CCA Stationery pension scheme. The Ombudsman found maladministration in the alleged failure to disclose the workings used to calculate monthly value adjustment factors and in the loss of a two-page calculation document. He directed Legal & General to obtain an independent actuary’s reconstruction of the factors used to calculate the scheme’s surrender value.

The appeal followed earlier proceedings before Lightman J, who held that the Ombudsman could not investigate the fairness of the contractual surrender terms but left open whether the calculation was an act of management. The issues were whether the relevant activities were within the Ombudsman’s jurisdiction and whether the Direction was within his statutory powers.

1. Appeal allowed. The findings of maladministration and the Direction were set aside.
2. The Ombudsman’s remit concerned maladministration by Legal & General acting as manager or administrator of the scheme. The commercial provision and continuation of the AF80 policy were outside that remit. The scope of management depended on the functions undertaken by the manager and ended when that function ceased.
3. The monthly value adjustment factors were calculated on a portfolio-wide basis for the Long Term Fund. They were assessed independently of the particular scheme and would have been calculated even if the CCA policy had not existed. Their setting was therefore an act concerning management of the Long Term Fund, not administration of the CCA scheme. Refusal to disclose the underlying methodology could not amount to maladministration within the Ombudsman’s jurisdiction.
4. The later calculation of the surrender value involved applying the factors to the scheme’s annual cash pools. It occurred after Legal & General had ceased to administer the scheme and was a purely commercial transaction. Termination of the policy and payment of the contractual sum were not acts of scheme administration.
5. The loss of the two-page document could not constitute maladministration because its creation and retention did not concern administration of the scheme. In any event, any duty to retain records would last only for a reasonable period, and the Ombudsman had not investigated or explained the alleged continuing obligation more than seven years after Legal & General ceased to act as administrator.
6. The wide wording of Part X of the Pensions Schemes Act 1993 did not confer unlimited remedial powers. Following Hillsdown Holdings plc v Pensions Ombudsman, [1997] 1 All ER 862, Edge v Pensions Ombudsman, [1998] Ch 512, and Wakelin v Read, [2000] PLR 319, the Ombudsman could not make an order which a court could not make. The Direction improperly delegated the Ombudsman’s investigation and fact-finding to an actuary appointed by the President of the Institute of Actuaries, whose appointment, conduct, information requests and costs were not effectively controlled.

• High Court (Chancery Division): Lightman J’s earlier judgment, reported as [2000] 2 All ER 7, held that the Ombudsman could not investigate the fairness of the contractual surrender terms but left open whether the calculation might be an act of management.
• High Court (Chancery Division): Etherton J adjourned the appeal to enable the Pensions Ombudsman to participate on issues of wider importance. The Ombudsman declined to attend.
• High Court (Chancery Division): Laddie J allowed Legal & General’s appeal against the Ombudsman’s determination.