Royal Mail Pensions Trustees Ltd v Gosling

Additional reckonable service purchased under a pension scheme does not, without more, constitute a contractual entitlement to pension benefits calculated independently of the scheme rules. Where the governing rules provide that a part-time member’s reckonable service is proportionately reduced when calculating pensionable service, an illustration and application referring to purchased reckonable service must be construed consistently with those rules. A member cannot establish maladministration merely because an illustration might have conveyed a more favourable outcome, where the scheme documents identified the relevant booklet and leaflet, the trustees did not purport to give financial advice, and the member obtained professional advice. The Ombudsman’s direction must therefore reflect the legal effect of the scheme rules rather than an isolated representation.

Royal Mail Pensions Trustees Limited, the corporate trustee of the Royal Mail Pension Plan, appealed against a determination by the Pensions Ombudsman dated 30 April 2007. The Ombudsman had found for Mrs Gosling, a part-time employee, and directed that she be credited with 4 years and 183 days of reckonable service if she continued paying 9 per cent of her part-time salary under the Addplan arrangements.

The dispute arose from an October 1997 illustration and a subsequent application referring to the purchase of 4 years and 183 days of additional service. Mrs Gosling contended that these documents created an entitlement to the stated amount of pensionable service. The central issues were whether the documents formed a contract excluding the scheme rules and, alternatively, whether the circumstances justified relief for maladministration.

1. The appeal was allowed. The Ombudsman’s direction was discharged. The direction would have given Mrs Gosling pensionable service calculated as if she were a full-time worker, producing an entitlement substantially greater than the Rules allowed.
2. The illustration and the signed Addplan application referred to the purchase of additional reckonable service, not expressly to pensionable service. Their meaning could be determined only by considering the Scheme and, in particular, the Rules governing part-time members and the purchase of additional service.
3. The Rules provided that, for a part-time member, reckonable service was adjusted by the proportion which the member’s contractual hours bore to full-time hours. That adjustment applied equally to reckonable service purchased through additional voluntary contributions. The illustration, its notes and the application therefore did not constitute a contract for pension benefits which excluded that proportional reduction.
4. No separate finding of maladministration had been made. Such a finding would in any event have required a proper basis for concluding that Mrs Gosling had been misled into entering an arrangement whose benefits were less than she reasonably understood. The trustees had not undertaken to advise her whether to join Addplan. The illustration referred her to the POPS booklet and leaflet No. 2, which explained the treatment of part-time service. She had obtained professional advice and should have ensured that the relevant documents were reviewed before joining.
5. Mrs Gosling was ordered to pay the Trustees’ costs, subject to detailed assessment, unless the parties made further submissions.

• High Court (Chancery Division): On appeal from the Pensions Ombudsman’s determination dated 30 April 2007, the court allowed the appeal and discharged the Ombudsman’s direction.