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Pensions A-Z is a collection of insights to help you further increase your awareness of pensions law.

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Pensions Ombudsman: Power to award compensation

The Pensions Ombudsman’s jurisdiction and powers are unusually wide. The apparently broad powers conferred by statute are a cause of debate amongst pension lawyers and can be a cause of concern for pension scheme trustees.

The Ombudsman has two types of jurisdiction. First he may investigate a complaint that a member has sustained “injustice in consequence of maladministration in connection with any act or omission of a person responsible for the management of the scheme”. Secondly, he may investigate any “dispute of fact or law”. Once the Ombudsman has completed an investigation, he will make a “determination”. If he finds in favour of the complainant in any respect “he may direct any person responsible for the management of the scheme….. to take or refrain from taking such steps as he may specify”.

The Courts have sought to put constraints on the apparently wide jurisdiction to make “directions”. But, in general terms, the Ombudsman does have power to direct that the “person responsible for the management of the scheme” (typically the trustees) should pay compensation.

Surprisingly, there is no cap on the maximum award of compensation that the Ombudsman can make. This means that he can deal with complicated and substantial claims of a sort which in any other area would be the subject of Court proceedings. Furthermore, he awards compensation where it would not be awarded by the Courts, such as for “distress and inconvenience”.

The Courts appear to accept that the Ombudsman can make awards for distress and inconvenience, even though their own power to do so is very limited. However, in two High Court appeals from Ombudsman determinations it has been held that awards for distress should only exceed £1,000 in very exceptional circumstances and that they should not be included in determinations as “ritual incantations”.