Smith v Sheffield Teaching Hospitals NHS Foundation Trust

On an appeal from a Pensions Ombudsman decision, an incorrect pension estimate does not automatically confer entitlement to the quoted benefit. The claimant must prove that the misinformation caused a different course of action, that the course was reasonable, and that it caused financial loss.

On a point-of-law appeal, an evidential finding can be disturbed only where it lacks evidential support or is perverse or irrational. Compensation for non-financial injustice must reflect the seriousness, duration and repetition of maladministration. An award at the starting point may reveal an error of fact or principle where repeated misinformation caused prolonged distress.

Mrs Angela Smith, a member of the NHS Pension Scheme, was repeatedly given incorrect information about the conditions for Special Class Status and retirement at 55 on an unreduced pension. She changed roles and later retired in reliance on that information.

The Deputy Pensions Ombudsman found maladministration but concluded that Mrs Smith had not proved financial loss. She was awarded £500 for distress. Under section 151(4) of the Pension Schemes Act 1993, Mrs Smith appealed on points of law, challenging both findings.

The central issues were whether the Ombudsman’s finding on financial loss was legally unsustainable and whether the award for non-financial injustice involved an error of principle.

1. Financial loss. The appeal on the first ground was dismissed. The pension estimates were not promises or warranties. To establish loss on that basis, Mrs Smith had to show what pension level she would have waited to achieve, that it was achievable within a defined period, that suitable employment would have been available, and that she would have continued working in it.

2. The Ombudsman was entitled to find that Mrs Smith would probably have retired on 31 August 2014. The evidence included her objective of early retirement, her failure to quantify her financial needs, the redundancy payment received, and her failure to seek further work after discovering the lower pension. The finding was supported by evidence and was not perverse or irrational.

3. The court declined to impose a general obligation on the Ombudsman to conduct an iterative investigation by identifying evidential deficiencies and inviting further material. That issue was not a ground of appeal.

4. Non-financial injustice. The appeal on the second ground succeeded. An appeal court must respect an experienced tribunal’s assessment and intervene only for an error of law. However, the award of £500 embodied such an error. The evidence showed a chain of pension estimates over approximately six years, each overlooking the five-year Special Class Status requirement, together with prolonged uncertainty before retirement.

5. The number of instances of maladministration and the duration and seriousness of the resulting distress were material. The absence of financial loss did not justify reducing compensation, because financial loss and distress caused by maladministration are analytically distinct. The court reassessed compensation at £2,750.

6. The appeal was therefore allowed on the second ground and dismissed on the first. Mrs Smith was provisionally awarded 50% of her appeal costs.

• Pensions Ombudsman: On 2 February 2017, the Deputy Pensions Ombudsman found maladministration, rejected the financial-loss claim, and awarded £500 for distress.
• High Court (Chancery Division): The appeal under section 151(4) of the Pension Schemes Act 1993 was dismissed on the financial-loss ground and allowed on the compensation ground. The award was increased to £2,750.