David Marsh, Pensions Secretary of the Forces Pension Society explains how one person’s simple enquiry unearthed an unacceptable practice of knowingly making incorrect pension awards that has been going on for over 12 months...

Following a request by a member of the Forces Pension Society to audit the pension award he was given by Service Personnel & Veteran’s Agency on completion of his Royal Navy service, against the award the pension calculator on the MoD website told him he should receive, it was discovered that the award made by SPVA was wrong, and as it transpired, he was not alone.

In April 2010 the Government’s Actuary Department (GAD) produced updated ‘factors’ to be used by the Service Personnel & Veteran’s Agency (SPVA) when calculating the amount an individual’s pension was to be reduced by, after they had taken Resettlement Commutation (the surrender of pension for an additional tax free cash lump sum), until they reached their 55th birthday. Soon after the effective date of this change, the SPVA updated the pension calculator on the MoD website to reflect the effect of the new ‘factors’, but still have not, at the time of writing this article, updated the software used by its staff to make pension awards to individuals on exiting the Armed Forces.

The result of this farce (and there is no other word to use that adequately describes this state of affairs) we are left with the embarrassing position of having, for the past 17 months, the pension calculator on the MoD website, (together with all its caveats of its output not to be taken as true entitlement) giving a more accurate calculation of pension entitlement than the award one has ended up with. So what has been going on to allow this to happen?

It must be emphasised at this point that this issue affects only those who left the Services between April 2010 and now, and only those on AFPS75 pension scheme who opted to take Resettlement Commutation. Therefore, if that is not you, then you will, in all probability, have received, or will receive, the pension award to which you are entitled.

Periodically the GAD will, for all manner of reasons, produce new factors for a range of different calculations used in the assessment of pension entitlement in the public sector. In most cases, the changes to the factors are applied to the software used by the pension scheme administrators (SPVA for the Armed Forces) within a reasonable period of receiving the new data. However, on this occasion it would appear that an executive decision was taken to delay updating the factors in question by 18 months, in the full knowledge that just about everybody leaving the Services with entitlement to Resettlement Commutation will opt to take it, so the number likely to be affected would not be small.

Such a delay in itself is understandable if other updates need to take priority – there are only so many hours in a day. However, what I find unacceptable is the willingness to knowingly be prepared to pay incorrect pension awards to over 5,000 people throughout this time and not have the courage or decency to advise those affected about the issue, and reassure them that once matters have been corrected any outstanding arrears will be credited appropriately.

By not doing this it has made the pension scheme administrators appear to be sneaky and, dare I say, a little untrustworthy, because this episode begs the question, “What else are they up to?”.

That said, on the whole SPVA does provide the Armed Forces with a decent service. I can assure you that the members of its staff with whom I regularly have dealings are hardworking, conscientious people who do an excellent job of maintaining that fine line between ensuring rules are complied with, and coming down on the side of the customer. However, on this occasion I’m afraid that it has let its customers down badly.

Do you believe that you are affected by this issue, and if so, what should you do about it? If you are confident that you are likely to be one of those who has been given an incorrect pension award then you should write to SPVA and ask for confirmation whether or not this is the case; and if it is, ask that your award be manually reconstructed so that you can draw the pension to which you are entitled and you are paid what you are outstanding. If SPVA decline to do this then you might want to consider making a formal complaint under the Internal Dispute Resolution Procedures (about which I have written in a recent edition of Pathfinder). This should force SPVA to rectify the problem at the first stage since it is clearly nothing more than an issue of maladministration.

I am regularly asked by potential members of the Forces Pension Society (FPS) what it is that the Society can do for them; I believe that this is a perfect example. An individual suspected that something was not quite right with the terminal benefits he was awarded, and as a member of the FPS he was able to get an independent assessment of his position. The resulting audit proved his suspicions to be sound and the result is, as they say, history. But without the availability of the Forces Pension Society’s independent expertise, this whole issue could have been conveniently swept under the carpet and nobody would be any the wiser.

If you are not yet a member and would like to call on the Society’s expertise, you can join via our website at www.forpen.org or call 020 7820 9988.