Member complaints often include a claim for ‘non-financial loss’ (also known as ‘distress and inconvenience’). Whereas financial loss can usually be assessed on substantive grounds, non-financial loss (distress and inconvenience) is more difficult to quantify. Depending on the circumstances, trustees might want to offer nothing, give an explanation and an apology, and/or make a compensation payment.
In deciding what to offer to a member who has made a complaint, Pensions Ombudsman decisions have always been a helpful guide. Awards made by the Pensions Ombudsman for distress and inconvenience have traditionally been fairly low, with awards of just £100 or £200 in this regard sometimes still being made. Anthony Arter, who was recently appointed as Pensions Ombudsman, has decided this is an area in need of reform, and the Pensions Ombudsman has published a factsheet: ‘Redress for non-financial injustice’. The factsheet explains what ‘distress’ and ‘inconvenience’ are. It goes on to explain what awards the Pensions Ombudsman might make and what factors the Ombudsman will take into account reaching a decision. For example, the factsheet says that an award is only likely to be made if the injustice is significant. However, where an award is made, the factsheet states that it is likely to be in the range of £500 to £1,000 and will be higher if necessary. A £500 minimum is a higher threshold than the Pensions Ombudsman has previously followed, but the new Pensions Ombudsman considers this will bring his awards more into line with those of Ombudsmen in other areas. £500 certainly feels like a material minimum amount to properly recognises distress and inconvenience; an award of say just £100 in today’s financial environment seems very low for significant injustice, and this therefore looks to be a useful ‘sweep of the new broom’ by the new office holder.
Trustees considering a complaint for non-financial loss (distress and inconvenience) should take into account this new higher minimum threshold. £500 may be a larger compensation payment than they would usually consider. However, it is the minimum payment that is likely to apply if a complaint goes to the Pensions Ombudsman service.
The spreadsheet also explains how the Pensions Ombudsman will assess non-financial loss, which again will be useful for trustees who may wish to consider the same factors.