Duty To Give Reasons: Pensions Ombudsman Upholds Complaint

A frequent question for pension lawyers is the extent to which trustees are required to give reasons for their decisions. This issue often arises when trustees are making decisions or exercising discretions in relation to the distribution of death benefits or the award of an ill-health pension.

The traditional trust law position was that trustees did not have a duty to give reasons for their decisions and, in most circumstances, should not do so. One argument for not giving reasons was that it made it harder for a disappointed beneficiary to challenge the decision. This was brought into question in 2003 when the Privy Council in the case Schmidt v Rosewood held that there was no general rule against trustees giving reasons for their decisions and that it was a question to be decided by the court in each individual case.

Meanwhile the Pensions Ombudsman, as far back as the Allen case in 2002, decided that as a matter of good administrative practice, trustees should provide reasons for their decision to those with a legitimate interest in the matter and that not knowing the basis on which an adverse decision is taken is an injustice.

Since Allen, many trustees have adopted the approach that when documenting decisions that have been taken regarding discretionary benefits they should, in most circumstances, give reasons for the decisions reached. In some cases it may be necessary to summarise or edit those reasons in order to protect the privacy of another individual.

This issue has again recently been considered by the Pensions Ombudsman in the case of Thomas (PO-2449)...