TPO: Use IDRP before asking us to consider the complaint

New announcement from The Pensions Ombudsman (TPO) reinforces the need for individuals and schemes to engage with IDRPs seriously and TPO’s recent update on how schemes should signpost to TPO is designed to make sure this happens. 

TPO has announced that it will no longer consider complaints through its Early Resolution Service where the matter has not gone through all stages of the pension scheme’s IDRP, effective later this year. TPO’s recent update on member signposting to TPO seeks to assist schemes with this change.   

Background

TPO continues to derive its principal powers by statute and, in particular, Part X of the Pension Schemes Act 1993. This statute empowers TPO to investigate certain classes of pensions disputes which may arise and certain restrictions which come into play as well. 

In accordance with the Personal and Occupational Pension Schemes (Pensions Ombudsman) Regulations 1996/2475, reg. 3, TPO will not investigate where an individual has not exhausted the occupational pension scheme’s internal dispute resolution procedure (IDRP) in its totality, which may comprise one or two stages. 

However, TPO may still choose to investigate under reg. 3, if:

1. There is no real prospect of the potential complainant receiving a final determination within a reasonable period under the scheme's IDRP; or

2. TPO decides it is reasonable for them to investigate and determine the matter.

When TPO introduced its Early Resolution Service in 2018, the Department for Work and Pensions (DWP) clarified in its guidance that an individual need not have gone through the IDRP in order to complain using it. However, the requirement to complete the IDRP remained for more formal resolution process. 

Announcement

TPO announced on 24 June 2024 that the requirement to exhaust all stages of the IDRP will be extended to all complaints to TPO including to those in the Early Resolution Service. This change is expected to be adopted from Autumn of this year.

In a blog post, Dominic Harris (the present Ombudsman) set out the reasoning for this decision, none of which will be controversial or surprising to those who have been involved in running cases with TPO. 

These include:

• demand has increased exponentially in recent years for TPO’s services and shows no signs of slowing down;
• there is an inability to resolve cases in a timely manner;
• most pension schemes engage with their IDRPs constructively and in good faith; and
• many complaints received by TPO ought to be resolved under the IDRP.

There will continue to be some exceptions where TPO will look at individual complaints while the IDRP investigation is ongoing, such as where there are vulnerable members or there is a time-critical situation. These complaints will be the purview of the volunteer service at TPO.

Consequences 

From Autumn 2024, save for very rare cases, complaints to TPO at any level will have to be considered by the pension scheme’s full IDRP process which may comprise one or two stages.

Most advisors to members will already encourage members to exhaust the IDRP first in any event and only to appeal to TPO where the IDRP process has been fully completed or where the trustees do not respond within eight weeks. The announcement will reassure schemes that TPO complaints should not come out of the blue and can only be commenced by the individual when they have been through the IDRP. Schemes who see a lot of member complaints should welcome the more consistent approach, although it remains to be seen if this will make TPO more efficient in handling complaints as time goes on. 

One consequence of the announcement – which will certainly be undesired both by TPO and schemes alike – is the possibility that TPO receives an influx of complaints from individuals in the next few months before the change comes into force. This will remain to be seen, however. 

Our View 

Pension schemes should note the approaching change and be ready to contest TPO investigations where a member has not exhausted the full IDRP. 

The announcement is also an excellent opportunity for schemes to consider bringing their existing IDRP policies up to date. Trustees should consider whether they want one or two stages to their IDRP process and whether the contact names and name of the chair of the trustee remain correct. 

Occupational pension schemes are required to maintain an IDRP process under section 50 of the Pensions Act 1995 (although exemptions exist for small self-administered schemes (SSASs) should certain criteria apply). Advice should also be sought if there is uncertainty on whether the scheme is exempt. Furthermore, the Pension Regulator (TPR)’s new General Code of Practice, in force as of 28 March 2024, has a module on dispute resolution which trustees should be aware of. Among other requirements, trustees are expected to: “regularly assess the effectiveness of the dispute procedure”.

TPO’s new signposting requirements

TPO have also announced some recommended wording for schemes to incorporate into their IDRP policies and other documents. This includes new wording for FCA-regulated schemes. TPO has provided generic wording as well as both long-form and short-form options. Trustees and providers should consider these options carefully and adopt for their IDRPs, scheme booklets and documents where relevant as part of their overall updating process for compliance with the new General Code of Practice.

In conclusion 

In the pensions specialist sphere, it is unfortunately not uncommon to see larger schemes indulge a conveyor belt approach towards member complaints. This results in, as TPO has identified, complaints making it to TPO which really ought to have been resolved in some way at IDRP level, thus saving time, expense and stress for all parties. Schemes should remember that TPO will most likely air their dirty linen in public so-to-speak and publish their decision, in contrast to the confidentiality which an IDRP offers. It is all round advantageous to resolve a dispute at IDRP stage where possible. 

Engaging legal advisors to review your IDRP policy and working out how best to add in TPO’s new wording, and to advise on specific member complaints is a commendable step towards mitigating liabilities, managing exposure, complying with TPR’s General Code of Practice, and general scheme hygiene. 

For individual members who are contemplating complaints, this change should be kept in mind before escalating to TPO. There is an onus on individuals to engage constructively with IDRPs and, where cases have no prospects, they should not incur further costs and time by escalating to TPO. 

Advisors are useful not just for the pension scheme but for the individual member as well and should not be viewed as out of reach. We for instance, where not conflicted, can offer an initial assessment on your case prospects at a competitive rate.

For more information about Irwin Mitchell's pensions team, visit their website here.