2005...Savings Accounts (PRSAs). OFFICE OF THE PENSIONS OMBUDSMAN 2 Foreword 5 Section 1 -...

2005Annual Report

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Annual Report of the Pensions Ombudsman 2005

Office of The Pensions Ombudsman

36 Upper Mount StDublin 2Telephone (01) 647 1650www.pensionsombudsman.ie

MISSION STATEMENT

To investigate and decide, in anindependent and impartialmanner, on complaints anddisputes concerningoccupational pension schemesand Personal RetirementSavings Accounts (PRSAs).

O F F I C E O F T H E P E N S I O N S O M B U D S M A N

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Foreword 5

Section 1 - Introduction 6

Section 2 - Summary of Activities in 2005 8

Case Management 8

Case Management Systems 8

Cases brought to Final Determination or Settled by Mediation 8

Delay 9

Information 9

Promotional Activities 9

Contacts with National andInternational Organisations 10

Memorandum of Understanding withFinancial Services Ombudsman &Financial Services Regulator 11

Public Access and Awareness 11

Website Upgrade 11

Renovation of Office 11

Training & Development 11

Staffing Issues 11

Section 3 -Caseload Summary &Statistics 2005 13

Analysis of Closed Cases 13

Mediated Cases 13

Final Determinations 13

Outside Terms of Reference 14

Miscellaneous Closure Reasons 14

General Statistics 15

Section 4 - Lessons Learned 17

General Issues 17

Pensions Coverage 17

Overprotective Legislation 17

Communications Issues 18

Structural Issues 19

Internal Disputes Resolution (IDR) Procedures 19

Delays in IDR 19

Duties of Trustees following IDR 20

Civil Penalties 21

General Matters Arising From Complaints 21

Withdrawal of a Complaint 21

Impartiality of the Office 22

Unsolicited Representations 22

Terms of Reference 22

Constitutional Rights of a Citizen 22

Priorities on the Winding-Up of a Pension Scheme 23

Integration Issues 23

The Pensions Act and Preservation 24

Small Insured Schemes 24

Small Frozen Benefits and Policy Charges 25

Construction Federation Operatives Pension Scheme 25

Income Continuance Plans 26

Public Service Pensions Issues 27

Supplementary Pensions 27

Information 28

Transfers - Funded Schemes 28

Pension Abatement 28

Break in Service 29

Administrative Circulars 30

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Table of Contents

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Section 5 - Conclusion 32

Section 6 - Financial Accounts 33

Annual Accounts for 2004 33

Annual Accounts for 2005 33

Appendices

Appendix 1 - Staffing 2005 34

Appendix 2 – Breakdown of Complaints by County 2004 & 2005 35

Appendix 3 – Nature of Complaints 2004 & 2005 36

Appendix 4 - Case Flow Summary and Analysis of File Closures for 2005 37

Appendix 5 - Number of ComplaintsReceived by Month during 2005 39

Appendix 6 - Financial Statements foryear ended 31 December 2004 40

Appendix 7 – Governing Legislation 47

Appendix 8 – Publications of the Office 48


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A Aire,

I am pleased to present my Annual Reportfor 2005, the second complete year ofoperation of the Office of the PensionsOmbudsman.

The work of the Office has continued toprogress and, as I predicted in my 2004Annual Report, the caseload has continuedto rise, and this has put increased pressureon the small staff of the Office. While wehave been able to maintain a good rate ofcase closure, I am becoming concerned atthe length of time it is taking to completeinvestigations. I am also afraid that thepressures of an increased caseload may haveresulted in our being unable to attend toother matters. I address this later in thisreport.

I will comment later on the sources of thecomplaints we receive and on the lessons tobe learned from them. The casework thisyear has highlighted a couple of issueswhich have been referred to the PensionsBoard, or to the Financial Regulator, asappropriate.

With this report I have, as last year,published a digest of cases. I hope that thiswill prove helpful to those whose job it is toconsider complaints in the first instance, aswell as to those who may be consideringmaking a complaint. As before, theidentities of both the complainants and therespondents have been withheld, to protectprivacy. Where public authorities areconcerned, it is not always possible toconceal a respondent’s identity, as it may beobvious from the occupation of thecomplainant.

I wish to thank you, Minister, for theongoing support you have given to mepersonally and to the work of this Office. Iparticularly value the help and supportgiven to me by the staff of your Department– the Planning Unit, with which I have

contact on an almost daily basis, and alsoPersonnel, Accounts, IS Services andFacilities Management. I am also grateful forthe help given to us during the course of ourinvestigations, particularly by Scope andRecords Sections. I appreciate that all thissupport is given in a spirit which completelyrespects the independence of the Office.

Again, I would like to record my thanks tothe Pensions Board, whose staff have beenmost co-operative, and to thank the Boardfor the access to its files which we are givenin the course of our investigations. I wouldalso like to thank staff at the Office of theOmbudsman, the Financial ServicesOmbudsman’s Bureau and the FinancialRegulator, as there is a certain amount oftwo-way traffic in complaints. All of usmake a point of trying to find the right‘home’ for complaints which are outside ourown jurisdictions. In that regard, I havesigned a Memorandum of Understandingwith my colleagues, Joe Meade, FinancialServices Ombudsman and Patrick Neary,Chief Executive of the Irish FinancialServices Regulatory Authority, the better tosafeguard the interests of consumers offinancial services generally.

Finally, I wish to thank my investigatorsand support staff, who have not wiltedunder a greatly increased workload, andwhose hard work and enthusiasm havemade such a huge contribution to theongoing success of this Office.

Beir beannacht,

Paul KennyPensions Ombudsman

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Foreword

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In this context I think it is fair to say thatthe response to the PRSA initiative has beendisappointing and it is clear that a freshapproach will have to be adopted if there isto be progress in achieving the target of 70%coverage set in response to the NationalPensions Policy Initiative (NPPI). It was inresponse to the poor take-up of PRSAs thatthe Government set the Pensions Board thetask of reviewing and reporting – a yearearly – on the state of pension coverage. Thereport of the National Pensions Review waspresented to Cabinet last November and hasrecently been published. It sets out a seriesof recommendations aimed at achievingcoverage of 70% by providing practicalincentives for people to invest in pensionschemes. I do not propose to comment ingreater detail on the report or itsrecommendations, which are now beingsubjected to detailed examination. However,on a general level I have highlighted anumber of practical issues in specific areasthat I have come across through complaintsto this Office. Some of these issues on theirown may not appear to be important, but itmay be that, combined with other factors,they may have the practical effect ofdiscouraging some people from investing inpension schemes.

One area that I highlighted in last year’sreport and to which I have again calledattention this year is the matter ofcommunications. During the year I wasagain struck by the poor quality and lack ofclarity and precision of manycommunications. Again, I appeal for thebetter use of plain English among pension

providers and scheme trustees andadministrators. I have no doubt that, apartfrom reducing the number of complaintsthat they have to deal with, it would alsohelp to promote member and consumerconfidence in pension products.

During the year I have come across anumber of issues regarding the InternalDisputes Resolution (IDR) procedures, onwhich I have gone into greater detail in thisreport. One of the main problems has beenthe delay in the issue of IDR determinationsin certain circumstances. I believe that, inmost instances, this failure has occurredeither because of ignorance of therequirements of the Pensions Act, or quitesimply as a result of bad organisationalarrangements. However, there is no doubt inmy mind that, in certain cases, the delay orfailure was the result of a deliberateobstruction of the process by the trustees ofthe scheme. I am glad to say that the recentSocial Welfare Law Reform and Pensions Actmakes provision to allow me to bypass theIDR process and investigate complaints insuch cases where there is clearly nothing tobe gained from the IDR process.

I am also pleased to note that the Act hasintroduced a system whereby monetarypenalties can be imposed by the PensionsBoard for alleged breaches of the Act, whichmay avoid the need to undertake criminalprosecution in the Courts. I believe this,when implemented will enable the Board todeal with technical and minor infringementsand will greatly facilitate the smoothoperation of the Act. I had asked in my last


Section 1

Introduction

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The whole subject of pensions has become increasingly topical in recent years,not just in Ireland, but also generally in the developed world. One of the majoraims of Government policy in this area has been to try to get people to takepersonal responsibility for planning for their future by persuading them to investin personal retirement schemes.

Annual Report that civil penalties beconsidered, and I thank the Minister for thisvaluable addition.

I have detailed in the body of the reportindividual issues that have arisen in relationto specific complaints. However, there is oneissue that I would like to refer to here andthat is the operation of the ConstructionFederation Operatives’ Pension Scheme,upon which there is more detailed commentbelow. I have no doubt that there are majordifficulties in relation to the operation ofthis scheme, particularly on the part ofemployers. These include failure to registerwith the scheme, failure to includemembers, failure to remit contributions ontime, or at all. In addition there is adistressingly high incidence of employersactually deducting contributions fromworkers’ wages and not remitting them tothe scheme. I have no sympathy at all forsuch people and will do everything in mypower to ensure that they pay what is due.Indeed, if it were in my power I wouldprosecute them for theft.

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CASE MANAGEMENT

My Office received 389 new cases during2005 and dealt with 2,375 telephoneenquiries. This represents an increase of 31%and 79% respectively over 2004. We ‘cleared’or closed 385 cases during the year. I amespecially happy with this figure, whichrepresents an increase of 215% over thenumber of files closed in 2004. I mentionedin my Annual Report for 2004 that one ofmy priorities had been to complete therecruitment process involved in getting afull staff complement in place. Thankfully,this is now done. The achievement ofdealing with the increasing volumes of newcases and general enquiries in this scenario istestimony to the hard work and dedicationof staff at all levels in the Office.

However, we entered into 2005 with 287complaint files still open and ended the yearwith 291 on hand. A detailed analysis ofcaseload and case management is dealt within the next Section of this report. While thetypes of complaint we deal with are bynature quite complex, involving time-consuming exchange of information andclarification of documentation, I amconcerned about the increasing length oftime it takes to process a complaint. Overall,average processing times have more thandoubled in 2005 when compared with 2004.The reasons for this are varied - I amconcerned that the staffing levels in theOffice are currently not sufficient and I dealwith this in more detail later on in thisSection and also, the nature of thecomplaints themselves, which can be verycomplex, is a contributory factor.

CASE MANAGEMENT SYSTEMS

Quite a bit of time is taken at present incollating management information statisticswhich involves the use of a number ofdifferent systems. A review of our case

management systems was carried out by anin-house group during 2005 and I haveagreed with their recommendation that anew integrated Case Management System isnecessary. This will automate theproduction of case management informationstatistics in a real time environment whichwill improve the ability of seniormanagement to set targets and qualityperformance indicators and monitorperformance against these targets. I hope toissue a Request for Tender for this systemduring 2006 with a view to having it inplace by early 2007.

CASES BROUGHT TO FINALDETERMINATION OR SETTLED BYMEDIATION

I issued 76 Final Determinations underSection 139 of the Pensions Act, 1990 (asamended) during 2005. Of these, 32% wereupheld either in full or in part and theremaining 68% were disallowed. Thismirrors the experience in 2004 and it will beinteresting to see if these trends continueinto future years.

During the year, 146 cases were settled bymediation; 66% of these were settled with aresult favourable to the complainant. Thisagain mirrors the experience of 2004. Thedifferences in what may be termed apositive outcome for the complainantbetween Final Determination and mediationcan partly be accounted for by the fact thatI cannot direct a rule change or override adiscretionary power of the trustees in aFinal Determination. A Final Determinationis also binding on all parties, subject toappeal to the High Court, and the financialawards that I can make are limited to theloss of scheme benefit - i.e. I cannot takeaccount of expenses incurred in fighting thecase, or compensation for stress or worry,etc. Mediation, on the other hand, allowsfor more flexibility and can very often


Section 2

Summary of Activities in 2005

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provide a solution that could not be arrivedat by a Final Determination.

I have adopted the position that I willnormally issue a Preliminary Notice ofDetermination in advance of a FinalDetermination which sets out the mainfacts as established during the investigationand what my likely determination will be,based on these facts. This provides both thecomplainant and the respondent with anopportunity to clarify aspects of theinvestigation report and to present anyfurther evidence or comments to me before Imake my Final Determination. This processworked well during 2005 but adds nearlyseven weeks to the overall time to FinalDetermination. However, I consider thisapproach to be practical and in the interestof natural justice and intend to continuewith it during 2006.

DELAY

Unfortunately, my Office continued toexperience delay in dealing with requests forinformation from certain public sectororganisations. I referred to this in last year’sAnnual Report and, while there have beenimprovements, I remain concerned that ithas taken a lot of effort on the part of thisOffice to encourage this improvement. I hadto threaten one organisation with referral tothe Pensions Board for prosecution beforeany improvement was forthcoming. This istotally unacceptable and I am consideringmy options in relation to organisationswhich show persistent delay. I may in thefuture identify such organisations by namein my reports, as well as considering referralfor prosecution.

INFORMATION

My staff members spend considerable timein giving individual information to thepublic. People telephone the Office todiscuss their problems – even to explorewhether they have a genuine complaint, orwhether the complaint that they haveidentified should be made to me at all. Thevolume of calls to the main Office numberhas increased substantially since last year, toa total of 2,375, a rise of 79%.

PROMOTIONAL ACTIVITIES

One of the general objectives set in myStatement of Strategy (2004 – 2006) is toestablish and promote the role of the Officeof the Pensions Ombudsman and to liaiseand establish good working relationshipswith the pensions industry in general, PRSAproviders, representative organisations,regulators, private sector companies,Government Departments and other publicsector organisations. This is done throughour website, www.pensionsombudsman.ie,by a small amount of advertising and byplacing articles in various pensionpublications and other journals. A regularcolumn is written for ‘Irish Pensions News’,the journal of the Irish Association ofPension Funds (IAPF). We also took outadvertising features with a number ofpublications to further improve generalpublic awareness of the role and remit of theOffice, e.g. the ‘Inside Government’magazine, IMPACT News, and SIPTUReport. We arranged for details about theOffice to be included in the Institute ofPublic Administration (IPA) and IAPFYearbooks and on the Consumers’Association of Ireland wallplanner. Wereviewed our complaint forms andassociated information leaflets during 2005and involved the Retirement PlanningCouncil in this process to ensure ease of usefor older people. In addition, my staff

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members have worked alongside thePensions Board during ‘Pensions AwarenessWeek’. Talks have been given to variousprofessional and representative bodies,including the IAPF, the Association ofPensions Lawyers in Ireland, the IrishInstitute of Pensions Managers, theInsurance Institute of Ireland, the Instituteof Certified Public Accountants, the SeniorCitizens’ Parliament, and SIPTU RetiredMembers’ Section. Information desks wereprovided at the SIPTU Women’s Forum inTralee and the biennial delegate conferenceof the same union in Cork.

My investigators continued to buildrelationships within the pensions industryand attended a number of training coursesduring the year provided by the industry. Iconsider that attendance at these courses isvery useful, both from a training andknowledge management perspective andalso as a means of publicising the functionof the Office.

CONTACTS WITH NATIONAL ANDINTERNATIONAL ORGANISATIONS

As well as the contacts mentioned above, Ihave had discussions during the year withthe Ombudsman, the InsuranceOmbudsman of Ireland and with theFinancial Services Ombudsman, whoseOffice has now absorbed that of theInsurance Ombudsman. As noted below, aMemorandum of Understanding has beensigned between the Financial ServicesOmbudsman, the Financial Regulator andmyself, designed to protect the interests ofconsumers of financial services generally.My Office has maintained contact with theConsumer Directorate of the Irish FinancialServices Regulatory Authority and theDepartment of Social and Family Affairs.Discussions have also taken place with theRevenue Commissioners, the PensionsBoard, the UK Pensions Ombudsman, the

UK Pre-Retirement Association and thePensions Management Institute. In thecourse of investigations my Office has alsoengaged with the Companies RegistrationOffice and the Director of CorporateEnforcement. I would like to record myappreciation of the co-operation receivedfrom all of these organizations.

Contact has also been maintained with anumber of Trades Unions, with theConstruction Industry Monitoring Agencyas well as with the Construction FederationOperatives’ Pension Scheme, and withEPACE, which monitors compliance byelectrical contractors with the RegisteredEmployment Agreement.

I am a member of the British and IrishOmbudsman Association (BIOA), andmembers of my staff participate fully in itswork, and sit on the various interest groupswhich deal with different aspects of anOmbudsman’s work. I consider the work ofthis Association to be a valuable resource forthe work of this Office. The main objectivesof the BIOA include encouraging, developingand safeguarding the role and title ofOmbudsmen; formulating and promotingstandards of best practice to be met byOmbudsmen in the performance of theirduties; holding meetings, conferences andseminars; publishing information andengaging in all such other activities as mayimprove public awareness of recognisedOmbudsman schemes and encourage theirefficiency and effectiveness.


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MEMORANDUM OF UNDERSTANDINGWITH FINANCIAL SERVICESOMBUDSMAN & FINANCIAL SERVICESREGULATOR

Discussions took place with the FinancialServices Ombudsman and the FinancialServices Regulator during 2005 with a viewto agreeing a Memorandum ofUnderstanding. The Memorandum, whichhas recently been signed, provides forexchange of information between theOffices and handling of complaints whichmight have implications for one or more ofthe Offices concerned. The purpose of this isto create an environment that is consumer-friendly to the users of financial services.

PUBLIC ACCESS AND AWARENESS

My Office makes every effort to ensure thatour services are as accessible as possible.Where complainants had particular accessproblems to my Office during the year, wearranged to visit him or her at an alternativesuitable location, including their ownhomes.

WEBSITE UPGRADE

During 2005, staff from the Officeundertook a review of the Office website toensure it meets the needs of our clients.Arising out of this review, it is intended toundertake a re-design of the website toenable it to deliver improved access for allusers and provide an enhanced service forour clients.

RENOVATION OF OFFICE

I achieved agreement that office space thatbecame available on the ground floor of ourpresent location at 36 Upper Mount Streetbe re-developed into a public office andreception area. The Office of Public Workswent to tender on this during 2005 and Iexpect that the refurbishment will be carriedout in 2006.

TRAINING & DEVELOPMENT

The process of personal training anddevelopment continued for all staff during2005. This involved technical training inpension related areas; instruction in thedifferent areas of information technology;and other training courses identified as partof each individual’s participation in thePerformance Management DevelopmentSystem. The joint training programmebetween the Pensions Board, the RevenueCommissioners, the Department of Socialand Family Affairs and this Office concludedin 2005.

STAFFING ISSUES

As mentioned previously, I finally had myfull agreed complement of staff in place bySeptember 2004. It can therefore be saidthat 2005 was the first year of operation ofthe Office with a full staff, even though Iwas appointed in April 2003. This agreedcomplement was based on initial estimatesmade in advance of the commencement ofthe Office and clearly must be subject toreview after a ‘settling in’ period. One of thedifficulties experienced during 2005 was theconstraints placed on the Office by the sheervolume of investigative work and generalenquiries. While this work is obviously our‘core business’, other activities that needattention suffered. For example, it affected

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our ability to develop more fully relationswith public and private bodies involved inpensions administration; to developperformance indicators; to publish aCustomer Service Charter; to conductcustomer service surveys; to re-develop ourwebsite; and limited our ability to undertakenecessary research. I mentioned in my 2004Report that, until we had more experience,we would not be able to make a morerealistic assessment of staffing requirementsfor the longer term. I consider that 2005 hasprovided this ‘experience’ and I intend tomake a request for additional staffing during2006 and am confident that the Ministerwill be supportive of my request.


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Staff of the Office of the Pensions Ombudsman

This year has seen a significant increase inworkload over last year as can be seen bythe comparisons, where appropriate, inwhat follows.

There were a total of 287 files broughtforward from 2004 and a further 389 newcomplaints received during 2005 giving atotal of 676 complaints. Of these, 385complaints were closed in 2005 compared to122 complaints closed in 2004, leaving 291files on hand at the end of the year. (SeeFigure 3.4)

ANALYSIS OF CLOSED CASES

Mediated Cases

Of the 385 cases closed during 2005, 146were settled by mediation. Of these, 95cases, or 25% of the total number closed,were resolved to the complainant’ssatisfaction without recourse to the rigourof a full investigation. This is a particularly

pleasing result when viewed in terms of theaverage overall length of time taken toconclude both types of cases from initialreceipt of complaint to closure, i.e. 26 weeksto arrive at a satisfactory resolution throughmediation as compared to 47 weeks to issueof a Final Determination in which thecomplaint is upheld. The remaining 51(13%) cases which were resolved followingmediation by my Office either did notmaterially alter the complainant’scircumstances or did not resolve the issue infavour of the complainant.

Final Determinations

Final Determinations under Section 139 ofthe Pensions Act were made in 76 (20%) ofclosed cases which is more than three timesthe number of Final Determinations madein 2004. Of these, 24 complaints wereupheld and 52 rejected. When it becomesapparent, in the course of examining acomplaint, that it will not be possible to

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Section 3

Caseload Summary & Statistics 2005

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Note: IDR – Internal Disputes ResolutionOTOR – Outside Terms of ReferenceUnsuccessful mediation – The original issue raised by the complainant was not resolved to his/her satisfactionSuccessful mediation – The original issue raised by the complainant was satisfactorily resolved

Final Determination - Complaint upheld

Final Determination - Complaint not upheld

Successful mediation

Unsuccessful mediation

General advice given

Complaint not proceeded with

OTOR - Group complaint

OTOR - Not in PO remit - miscellaneous reason

OTOR - Other Ombudsman/Regulator/Organisation

OTOR - Out of time

OTOR - Social Welfare complaint

Advised re IDR - no further contact

0 10 20 30 40 50 60 70 80 90 100

24

28

13

30

32

16

1

24

19

51

95

52

Figure 3.1: File Closures by Reason in 2005

resolve the issue through the mediationchannel, the complainant is notified that aformal investigation resulting in the issue ofa Final Determination is to commence. Ourstatistics show that the average length oftime taken to process a case from initiationof a formal investigation to issue of a FinalDetermination was 33 weeks in 2005compared to 25 weeks in 2004. I muststress, however, that this is just an averageindication, as the length of time takendepends not only on the complexity of thecase but also on the cooperation of allparties to the complaint in furnishinginformation requested in a timely manner,e.g. the maximum number of weeks toprocess a case from formal investigation toFinal Determination in 2005 was 110 weekswhile the minimum was three weeks.

In cases where a formal investigation is totake place I generally issue a preliminaryview to all parties to the complaint prior toissuing the Final Determination. Thepreliminary view sets out the material factsof the case and gives an indication of thedecision which will be contained in my FinalDetermination. The purpose of issuing apreliminary view is to give all parties to thecomplaint the opportunity to respondwithin a specified period with anyadditional evidence which may not havebeen considered during the originalinvestigation and which I can then take intoaccount in making my Final Determination.While this prolongs the duration of theinvestigation I believe it is beneficial andcontributes to a fairer outcome for allconcerned.

Outside Terms of Reference

A total of 92 (24%) of closed cases werefound to be outside my terms of referencefor various reasons, e.g. 32 cases camewithin the remit of another Ombudsman orRegulator while 30 cases were found to beoutside the time limits within whichcomplaints can be investigated by myOffice.

Miscellaneous Closure Reasons

My Office cannot normally investigate acomplaint or dispute until the matter hasbeen submitted to an Internal DisputesResolution (IDR) procedure. Twenty-eight(7%) cases were closed as a result of thecomplaint not being proceeded withfollowing advice to the complainant tosubmit to the IDR procedure.

A further 24 (6%) cases were closed as aresult of the complainant not proceedingwith the complaint for a variety of reasonsand 19 (5%) were closed following theprovision of general advice being sufficientto satisfy the complainant’s query.


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GENERAL STATISTICS

During 2005, 79% of complaints werebrought by men as compared to 21% bywomen which is similar to the 2004 patternof 78% men and 22% women. The trend inthe relatively low number of complaintsreceived from women bears out the PensionsBoard’s concerns regarding women andpensions as reported in their press release tomark International Women’s Day in March2006 that “………women are particularlyvulnerable in the area of pension provision.Only one third of working women outsidethe public service, and just 46% of thewomen in the Irish workforce overall,currently have pension coverage.”

The breakdown of complaints received in2005 classified by pension scheme type isalmost identical to that of 2004, i.e. privateoccupational pension schemes accounted for58% of the complaints received in 2005 ascompared to 59% in 2004 while the figurefor public pension schemes is 41% for bothyears. There were just two complaintsreceived in 2005 concerning PersonalRetirement Savings Accounts (PRSAs) whilethere were no PRSA complaints in 2004, asmight be expected given that PRSAs onlycame into existence in 2003.

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Male 79% Female 21%

Figure 3.2: Complaints received from Men and Women in 2005

PRSAs 1%

Private Pensions 58% Public Pensions 41%

Figure 3.3: Complaints by Scheme Type in 2005


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Figure 3.4 – Workflow Summary 2005

On Hand at End ofthe Year

291

Telephone Enquiries

2,375

Complaints Closedduring the Year

385

Resolved by Mediation146

S. 139 Determinations Made76

Outside Terms of Reference92

Advised re IDR - no furthercontact

28

Other Closure Reasons43

Complaints On Handat Start of the Year

287

Complaints Receivedduring the Year

389

Total for the Year

676

GENERAL ISSUES

Pensions Coverage

One area of concern that has again come tomy notice during the year is the wholequestion of poor pension coverage in thepopulation generally. This is obviously anissue which is constantly being highlightedelsewhere and we are all too well aware ofthe fact that up to 900,000 people in theState will have to rely solely on the Statepension when they retire. There are,however, a number of specific areas which Iwould like to highlight and which I havebecome aware of through variouscomplaints that I have received.

On a general level I have no doubt thatmuch of the problem has to do with theeffects of public policy in the past. For along period women were kept out ofpension schemes if they got married, andindeed women in the Civil Service andelsewhere had to resign their position whenthey married. Unfortunately the effects ofthis policy are still being felt. Our attitudestoward this at the time were perhapsmisguided, and as a result, women often didnot see themselves as being in thepensionable sector of the workforce.Consequently, many of them opted out ofpension schemes. They were given theopportunity to do so at the time. Despitethe declared policy of the Government toincrease pensions coverage, particularly asfar as women are concerned, their requeststo be allowed to join the schemes now arebeing denied, even for future service. It isnot certain that these people are beingoffered PRSAs as is required by law; but,even if they were, the employer need notcontribute.

Indeed there is a perception out there thatthis is an issue that is perhaps limited to theprivate sector. However, this is not so andthe perceived wisdom that the public sectoris well catered for is not necessarily true.

Notwithstanding the fact that theProtection of Employees (Part Time Work)Act has been in operation since December2001, there are many hundreds of workersfor whom no satisfactory arrangements areyet in place. I am aware of considerabledelays in areas of the University sector.Another example is the non-teaching staff ofprimary schools. A pension scheme for themwas introduced in 1987 and many people,particularly women, opted out and are notnow allowed to opt in, even though theyregret their decision.

I discovered another case where a man whoworked in a semi-State body for 30 yearswas not entitled to membership of thepension scheme because he was employedon a temporary basis for all those years. Inthis case, there was no entitlement to agratuity either. This on the face of it wouldappear to be a ludicrous state of affairs.However, it is an employment rather than apensions issue, and I can do nothing aboutit.

Where there is no pension scheme available,the employer has a legal obligation to offer astandard PRSA. Although the Departmentof Finance has reminded public sectoremployers of their obligations in this area,there is some evidence that these obligationsare not being universally honoured. In anyevent, even where a PRSA is being offered,there is no obligation on the employer tocontribute to it, so these workers can bevery badly off by comparison with theirpensionable colleagues.

Overprotective Legislation

The Pensions (Amendment) Act, 2002changed the preservation rules by providingfor the compulsory preservation of benefitsafter two years’ membership of a schemerather than the previous five.

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Section 4

Lessons Learned

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I have been approached by a number ofworkers from overseas, who were upset bythe manner in which this change wasintroduced. Most were health serviceworkers and, when they had taken upcontracts of employment, one of the ‘selling’points was that they would receive a refundof their superannuation contributions ifthey left after less than five years. Theywere given no information when the ruleswere changed.

To such workers these compulsory pensioncontributions represented savings that couldbe very useful on their return to their owncountries. However, they see little value insmall deferred pensions, payable in Euro,with the expense implied in currencyconversion, to be paid many years into thefuture – if they survive. Moreover, Irelanddoes not operate double taxationagreements with many of the countriesconcerned.

Again this is something that I have raisedwith the Minister for Social and FamilyAffairs, as I feel that the law in this case isoverprotective and not genuinely beneficialto the member. Refunds of mandatorypension contributions can be given inAustralia to non-residents who are leavingthat country for good. I feel it ought to bepossible to take a similar pragmaticapproach here.

Communications Issues

This is a matter that I raised in my lastAnnual Report but feel it needs to berepeated. The pensions area by definitionhas to be, and generally is, well regulated.Codes of practice must be followed andvarious standards must be met. This is as itshould be - it is important that the interestsof members are protected at all times.However this can, in some instances, be adouble edged sword. Although Disclosure

Regulations under the Pensions Act prescribethe information that must be given toscheme members and other beneficiaries indifferent situations, I am again struck by thepoor quality and lack of clarity and precisionin many communications. The problem isthat a provider may be tempted to issuedocumentation that meets all legal andregulatory requirements – on paper –without the information being clear to theperson buying the product. Again I wouldencourage the greater use of plain Englishamong pension providers. I have no doubtthat additional investment in effectivecommunication would greatly reduce thenumber of complaints that trustees andtheir administrators have to deal with. Itwould also serve to promote member andconsumer confidence in pension products.

I have also come across problems withliteracy when dealing with complaints. Thisis a more difficult problem because evenwhat we consider to be plain English maynot be clear to people who have readingdifficulties. People with hearing or sightdifficulties also present a challenge tocommunication.

There are many organisations available tohelp us to meet these challenges. Forinstance, I have decided that all new forms,booklets and information leaflets issued bymy Office will be vetted at least by theNational Adult Literacy Agency.

I will not be sympathetic in cases where acommunication is clearly designed first andforemost to ensure that regulatoryrequirements are met to the letter - i.e., toprotect the provider, with no thought forwhether they can be understood by theconsumer.


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STRUCTURAL ISSUES

Internal Disputes Resolution (IDR)Procedures

The Pensions Act and the PensionsOmbudsman Regulations require that acomplaint be submitted to an InternalDisputes Resolution (IDR) procedure beforeI can accept it for investigation. Even wherethere is no prospect of an investigationtaking place, I recommend the use of theIDR process, though it may be clear that thesubject of a complaint is outside myjurisdiction – for example, by being out oftime. The IDR process, used in the rightspirit, can often resolve problems that seemintractable, even without the prospect of aninvestigation at the end of it.

I am, however, concerned that somecomplaints are being submitted for‘pensions IDR’, which are in reality notpensions disputes, and which could not beresolved by the pension scheme trustees.Sometimes, disputes will arise which havetheir origins in purely contractual matters,outside the rules of a pension scheme, orwhich are essentially industrial relations,rather than pensions, issues. It can happenthat a pension scheme member, faced with aproblem, may have already tested theindustrial relations (IR) processes availablewithout achieving a remedy, or may lackconfidence in the IR machinery. Manypensions issues are bound up with IRproblems anyway, so it may be tempting to‘bundle’ everything and dress it up as apension problem, in the hope that thisOffice will sort it out.

Some IDR procedures incorporate a stepwithin them which is designed to filter outcases which do not fall within my terms ofreference.

On a preliminary examination of suchmatters it is often possible for us to see thatthe complaint being made is outside my

remit, or that only one aspect of acomplaint may bear investigation. Thecomplainant will be appropriately advised insuch cases. We will also be pleased to advisetrustees if they are in doubt over whether acomplaint is likely to fall within the termsof reference of the Office.

Delays in IDR

I have again come across several cases during2005 where for one reason or another IDRdeterminations have not been issued withinthe three month time period provided for. Insome instances this may have occurredbecause of either ignorance of therequirements of the Pensions Act, or quitesimply as a result of bad organisationalarrangements. However, there is no doubt inmy mind that, in certain instances, thedelay or failure to complete the IDR processwas as a result of a deliberate obstruction ofthe process by the trustees of the scheme.The problem is, however, that under thePensions Act at present there is no specificprovision for me to deal with the failure toissue a determination within the statutorytime period. I have been in contact with theDepartment of Social and Family Affairs inrelation to this issue and this is in theprocess of being remedied.

I did mention in my report for 2004 thatthere were particular difficulties in theHealth and Education sectors with thetimely completion of IDR. I am pleased tosay that there has been considerableimprovement in both areas, which I willcontinue to monitor.

In one case this year a complainant, whowas a deferred beneficiary, was told –incorrectly – that she was not a memberand was therefore not entitled to bring hercomplaint to an IDR process. In this case,the employer was the person incorrespondence with the complainant. She

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received notification that she did not qualifyfor IDR one day before the expiry of thethree month time limit specified by thePensions Act. The employer was acting uponincorrect legal advice and was promptlydisabused by this Office. The IDR processwent ahead eventually, but the investigationof the complaint was unnecessarily delayed.

Duties of Trustees following IDR

A number of queries arose during 2005 inrelation to how trustees of schemes shouldoperate their IDR procedures. I havepreviously stated that this is primarily amatter for the trustees themselves toconsider. However, some questions raisedparticular issues which I feel might usefullybe addressed in my Annual Report.

The issues were raised in the context of theLocal Government Superannuation Scheme,but are applicable across all pensionschemes.

The question raised with me was in thecontext of the trustees, having reviewed acomplaint in relation to the non-inclusion of20 hours’ overtime in the calculation of finalpensionable remuneration, decided that fiveof these hours should be consideredpensionable on the basis that they met therelevant criteria. The matters that neededclarification were:

1. Should the trustees arrange a reviewof the complainant’s pension benefitsand pay any arrears due if thecomplainant refuses to accept theNotice of Determination from thetrustees and brings a complaint tome?

2. Should the trustees arrange a reviewof the complainant’s pension benefitsand pay any arrears due if thecomplainant accepts the Notice of

Determination from the trustees,without prejudice, but indicates tothem that he will take his case for theremaining element of the overtime tome as a complaint?

3. Should the trustees arrange a reviewof the complainant’s pension benefitsand pay any arrears due if thecomplainant simply fails to respondto the Notice of Determination?

4. What happens if the complainantaccepts the Notice of Determinationfrom the trustees but later brings acomplaint to me?

The procedures for internal resolution ofdisputes are set out by regulation under thePensions Ombudsman Regulations, 2003(S.I. 397 of 2003). I believe that article5(3)(b)(ii)(D) is the relevant issue here. Thisarticles provides that the Notice ofDetermination under the scheme’s internaldisputes procedure shall include a statementthat the determination is not binding uponany person unless, upon or after the makingof the determination, the person assents, inwriting, to be bound by it. Therefore, in asituation where the complainant does notagree with the decision, the question arisesas to whether the trustees shouldimplement it especially if they are aware ofa complaint being made to me.

My answer to this is that they should,especially where the decision is in any wayto the benefit of the complainant. Thetrustees have a fiduciary duty to themember and to all the members and, if theyare aware of an incorrect payment, wherebythe member is receiving benefits that areless than those to which they have decidedhe is entitled, they must take all immediateand reasonable steps to address this, so as tolimit any continuing loss to the member.This is without prejudice to anyinvestigation and determination that I maymake in relation to the complaint. Any


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failure to do this could in itself beconsidered maladministration.

However, where the decision of the trusteesis against the member (e.g. reducingbenefits), the trustees should consider theposition more closely. Taking the fiduciaryduty of the trustees into account again, itmay be in the interests of the trustees andthe complainant to take immediate steps toreduce payments so that an overpaymentdoes not continue to grow. However, theremay well be situations where the trusteesquite correctly decide to hold offimplementing a decision until after it hasbeen investigated by me. This must bedecided on a case by case basis.

Therefore, in relation to the scenarios listedat (1), (2) and (3) above, I consider that theyshould immediately review thecomplainant’s entitlements. In relation toscenario (4), I would take the view that, ifthe complainant agreed in writing to bebound by the Notice of Determination, heshould not be bringing his complaint to me.The exception to this would be where thecomplainant alleges he was in some waymisled or coerced into accepting it, or thedetermination was inherently wrong andthe complainant was in an unfairlydisadvantaged situation and not in aposition to realise this.

Having said all that, there may be cases inwhich a decision made during the IDRprocess, which appears to confer a benefiton the complainant, actually conceals amuch more complex situation. We are awareof cases where the ‘headline’ rate of pensionshould be increased, on the face of things,but where there may have been significantoverpayments in the past. These cases needcareful review. Unfortunately many of thoseinvolved are quite old, and time for review isshort.

Civil Penalties

I am particularly pleased that the SocialWelfare Reform and Pensions Act, 2006, hasintroduced a system whereby monetarypenalties can be imposed by the PensionsBoard for alleged breaches of the Act, whichmay avoid the need to undertake criminalprosecution in the Courts. I believe this willenable the Board to deal with technical andminor infringements and will greatlyfacilitate the smooth operation of the Act. Ihad asked in my last Annual Report thatcivil penalties be considered, and I thank theMinister for this valuable addition. Itremains to be seen how the system works inpractice.

GENERAL MATTERS ARISING FROMCOMPLAINTS

Withdrawal of a Complaint

2005 saw some attempts to withdrawcomplaints before a determination wasmade. What I found was that thecomplainants had either received apreliminary view, which indicated that thedecision might not be in their favour, orrealised anyway that there was littlelikelihood that I would uphold theircomplaint. They would like to continuetheir battles elsewhere, but couldn’t do thatin the face of a binding determination. Oncean investigation is begun, a determinationmust be made. When a person makes acomplaint against another person – whetherit be an employer, an administrator or atrustee - the person complained against hasa right in equity to have the matter decided,for better or worse. It would be grosslyunfair to respondents if complainants wereallowed to withdraw a complaint, simplybecause they did not want a bindingdecision given against them.

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Impartiality of the Office

One complainant (who also sought towithdraw his complaint) was quite unhappywith the fact that the staff of this Office arecivil servants, who are being asked toinvestigate the activities of other civilservants in cases involving the publicservice. I had no difficulty in repudiatingany allegations of partiality on the part ofthe staff of this Office, in whose integrity Ihave the utmost confidence.

Unsolicited Representations

On the subject of impartiality, I havereceived, over the course of this year, anumber of letters making representation onbehalf of complainants. In some cases, thesecame from public representatives and I fullyunderstand the work which they do onbehalf of their constituents. In many cases,the intervention of public representativeshas been helpful, in the sense of ensuringthat people put a coherent case to me wheninitiating their complaints.

What has not been helpful, however, is thereceipt of unsolicited representations fromthird parties with no discernible interest inthe matter of a complaint, urging me to findin favour of the complainant on variousgrounds. Such representations are alwaysignored.

Terms of Reference

A number of complainants during the yearhave complained about what they perceiveas the restricted powers of my Office.Specifically they were unhappy about thefact that, under Section 139 of the PensionsAct, I am not allowed to order a change tothe rules of a scheme or the conditions of aPRSA contract; nor am I allowed to direct

the substitution of my decision for that ofthe trustees of a scheme in relation to theexercise of discretionary power under therules of the scheme.

The Oireachtas chose to place somerestrictions on the scope of my decision-making powers. The restriction relating totrustee discretions is not unusual. Even theHigh Court would not take on the exerciseof a power which properly belongs to atrustee. It is also logical that I should notinterfere with scheme rules, because it is notmy place to alter the intentions of thesponsoring employer who made the rules inthe first place. I am bound to examinecomplaints in the light of the rules of thescheme and to satisfy myself as to whetherthese rules have been complied with or not.

In terms of examining procedures, I can anddo address these and there are numerousinstances of procedures being changed at thebehest of this Office where the operation ofsuch procedures brought about inequity orinjustice. I have also brought matters to theattention of the Minister for Social andFamily Affairs and, indeed, of otherMinisters, where I believed that matters ofpolicy needed to be examined as a result offacts that had been uncovered in the courseof investigations.

Constitutional Rights of a Citizen

In one particular complaint the complainantclaimed that my Office could not defend theconstitutional rights of a citizen, eventhough Article 40 of the Constitution putsan obligation on the State and its agenciesto vindicate the rights of citizens and,therefore, it was incumbent on the Stateand its agencies, including this Office, todefend his constitutional rights.

I ruled in this particular case that the ruleswith which the complainant disagreed had


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never been challenged in the Courts in thelight of any constitutional provision and,unless and until they are, they must bepresumed to be constitutional. My brief isvery much limited to maladministration ofpension schemes and any finding of fact orlaw which I might make will be restricted tothis area alone.

Priorities on the Winding-Up of a PensionScheme

Section 48 (3) of the Pensions Act contains aprovision which enables trustees of ascheme in winding-up to make a transferpayment to another occupational pensionscheme, without the consent of members. Ibelieve that this section was originallyintended to facilitate transfers in schemeswhose rules did not contain any transferpower, and where the amendment of therules might prove difficult in winding-up.Complaints were received in two caseswhere this power had been used, quitelegitimately, but the members had not beentold by the trustees that the power wasbeing invoked. A great deal of bother couldbe avoided if trustees took the trouble tonotify scheme members of actions that theyare about to take, particularly when itinvolves a transfer to another pensionscheme, in respect of which consent is notgoing to be sought.

A more sinister use of this sub-sectionemerged in the case of three identicalcomplaints in relation to one scheme. Thisinvolved the transfer of members from ascheme in winding-up to another scheme ofthe same employer. Both schemes were insurplus and the eventual winding- upyielded a large refund to the sponsoringemployer. It was decided not to purchaseannuities for the pensioners in this case, butto transfer their liabilities into the secondscheme. The assets transferred, however,would not have been sufficient to purchase

annuities for the pensioners concerned. Thecomplaint in this case was that thepensioners had lost financially and I couldnot uphold that, because no financial losshad yet been incurred. In fact, because theyrank first in order of priorities if the secondscheme was wound up, the pensioners aremore secure than the active members anddeferred beneficiaries of the second scheme.I consider that this is a use of the transferpower which was never intended. Althoughthe complainants in question were notdisadvantaged, the members of the receivingscheme are now in a less secure positionthan they were before the transfers. In theinstant case, the waters were furthermuddied by the fact that a single individualacted as actuary to the scheme, consultantto the sponsoring employer andrepresentative of the Corporate Trustee inrespect of both schemes – a clear failure by thefirm concerned to identify, let alone dealwith, an obvious conflict of interest.

Integration Issues

In private sector schemes, supplementarypensions (see below) are not common.Where retirement takes place before Statepension age, however, ‘bridging’ pensions –temporary pensions to cover the gapbetween the two ages – are reasonablywidespread.

An integration issue arose in certainschemes which are, quite frankly, badlydesigned. We have come across cases whereintegration with Social Welfare pensions isdone in a rather crude fashion – bydeduction from pay across the board, toarrive at pensionable salary, whether or notthe individual is entitled to a full Statepension, or any State pension at all. Theseprivate sector schemes typically do notcontain any provision for supplementarypensions to be paid if the State pension isnot payable, or not payable in full. While an

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employer is quite entitled, in principle, todefine pensionable salary in any way itwishes, the crude design of schemes like thisraises a question of possible discrimination.Clearly, such a scheme discriminates directlyagainst anyone who will not be entitled to afull State pension at normal pension age. Inpractice, the majority of people who willnot qualify for full State pensions tend to bewomen; and this raises the question ofwhether there is, in fact, indirectdiscrimination built into these schemes. Iam not aware, however, that any case hasbeen made in relation to this as yet – andequality matters are outside the remit ofthis Office.

The Pensions Act and Preservation

Another complaint involved a notificationgiven to an employee that certain service,during which he was on sick leave, wouldnot be reckoned for pension purposes. Therules of the scheme contained the power toignore this service for pension accrualpurposes. However, the power to ignore theservice had not actually been exercised, norhad the member been notified that theservice would not reckon. The Pensions Actrequires that all service is reckonable unlessthe member has been advised in writing by thetrustees that it is not. In this case, nonotification was sent to the member andtherefore the service had to be taken intoaccount. This matter was dealt with as apreliminary issue and it never became aformal investigation. However, it remindedme that a great many people may not befully aware of the requirements of thePensions Act in relation to preservation.

Small Insured Schemes

Another phenomenon which has come tolight is in the area of small, insured schemes.

In some cases, insurance companies havebeen imposing minimum incrementalpremiums. This practice may well beallowed by the small print of the policywording, which may also permit theinsurance company to vary the amount ofthe minimum premium that may berequired. This is a practice which wasspecifically discouraged in the case ofPRSAs, where providers are not allowed toprice themselves out of a market byimposing minimum premiums which arevery high. In the case of two complaintsreceived at this Office, minimumincremental premiums of €800 per annumwere being demanded. The schemes inquestion were small insured schemes, forlower paid employees. In one case, the totalemployer’s contribution was 10% of paywhich, by the standards of many definedcontributions schemes, is relatively high. Aminimum incremental premium of €800,however, means that the member in thisexample would have to receive an increaseof €8,000 in salary to justify the premiumconcerned.

While these products may often be labelledas ‘Executive Schemes’, it is a fact that theywere sold across the board to employers fortheir staff at all levels, and they werecertainly not confined to the sort of peoplewho might be getting increases of €8,000 perannum. In both cases, following myintervention, the insurance companiesconcerned agreed to accept a lowerincremental premium than the one theywere seeking to impose, but I referred thepractice in general to the Financial Regulatorfor examination, as I believe it is grosslyunfair to employees, who have a right toexpect that the premiums paid on theirbehalf should keep pace with changes intheir salary, and to their employers, who arewilling to pay the contributions they havepromised.


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Small Frozen Benefits and Policy Charges

Another practice which I have referred tothe Financial Regulator also arises in insuredschemes, where benefits are made ‘paid-up’when an employee withdraws fromemployment. In many cases, the memberwho leaves service does not yet have analternative pension scheme into which totransfer his benefit, and so they are left asfrozen or deferred benefits in the scheme ofhis old employer. Some insurance companiescharge ongoing policy fees in relation tothese, often a monthly or annual deductionfrom the fund. I suspect that this practice isnot intended to be oppressive, but arisesfrom automated systems which have notbeen properly adapted to take into accountthe position of an employee with a smalldeferred benefit.

However, such charges can result in thegradual erosion of the benefit, particularlywhen markets are not performing well, orwhere the basic benefit is fairly low to startwith – policy fees often tend to be flat-ratecharges. Again, this practice is beingexamined by the Regulator.

Construction Federation OperativesPension Scheme

I have referred to the operation of thisScheme in the 2004 Annual Report butunfortunately I feel obliged to refer to it yetagain. The Construction FederationOperatives Pension Scheme (CFOPS) was setup by the Construction Industry Federationto meet the legal requirements of aRegistered Employment Agreement, whichin turn provides that each employer towhom the agreement applies shall become aparty to a contributory scheme, approved bythe Revenue Commissioners to providepension and mortality benefits forconstruction industry workers. The CFOPShas been approved by the Revenue

Commissioners as a bona fide pensionscheme for the purposes of the TaxesConsolidation Act 1997 and is considered tobe a defined benefits scheme for the purposeof the Pensions Act 1990. Towards the endof 2004 and indeed throughout 2005 I havereceived a steady stream of complaintsregarding the operation of this scheme.

A recent report by Mercer HR Consultingfor the Pensions Board on the operation ofthe scheme has indicated that between50,000 and 70,000 construction workers inIreland should be, but are not, in theCFOPS. I personally feel that the figure maybe higher than that, as official employmentfigures for this industry may be understated.One of the major problems is the categoryof so-called self-employed workers. Atpresent there are approximately 70,000workers classified as having self-employedstatus by the Revenue Commissioners andwho are thus not eligible for inclusion in thescheme. While such people are technicallyoutside the scope of the PAYE system, theyare not allowed to contribute to anoccupational pension scheme; nor can anyemployer make a contribution on theirbehalf. Mercer identified this problem andmaintained that the self-employment ofmany of these workers was bogus. It hasbeen my custom to ask the Scope Section ofthe Department of Social and Family Affairsto determine the insurability of individualsfor PRSI purposes. So far, Scope Sectionhave determined in relation to any casesreferred to them, that the individualconcerned was an employee rather than self-employed.

There are obviously major difficulties inenforcing compliance with the CFOPS. I amgrateful for the co-operation of theConstruction Industry Monitoring Agency(CIMA) which, as part of its efforts tosecure compliance, advises workers of theexistence of this Office and helps them toformulate complaints. I also co-operate withthe Trades Unions in the industry and with

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Pensions And Conditions Electrical (EPACE),which monitors electrical contractors inrelation to the scheme.

As before, the complaints lie almostexclusively against employers, i.e. failure toregister with the scheme, failure to includemembers, failure to remit contributions ontime, or at all. There is a distressingly highincidence of employers actually deductingcontributions from workers’ wages and notremitting them to the scheme. I have nosympathy at all for such people and will doeverything in my power to ensure that theypay what is due.

It is instructive –and somewhat depressing -to note that, overall, complaints about non-remittance of employee contributions havegone up from 17 (6%) of total complaintsreceived in 2004 to 63 (16%) in 2005. Asizeable proportion of these relate toCFOPS.

I am also concerned about firms whichdescribe themselves as employment agenciesand claim on that ground to be exempt fromthe Registered Employment Agreement.One firm, which happens to be aparticipating employer in the scheme, hadevidence given to the Labour Court that it isan agency. It did not at the time have, andnever had, a licence to operate as anemployment agency. It is high time that theposition of agencies was clarified once andfor all, so that employers cannot avoid theirresponsibilities to workers in this way. Thatsaid, there are reputable firms which do paycontributions for hundreds of employeesand they should not have to operate at acompetitive disadvantage against their lessscrupulous counterparts.

A disturbing trend has also emerged whereworkers notify my Office, either directly orthrough CIMA, of failure by their employersto remit contributions, but we cannotproceed with an investigation because thecomplainant is afraid to allow his name to

be used in connection with an investigation.Unfortunately, in this particular industry,there have been instances of the withdrawalof complaints in circumstances that lead meto suspect intimidation by employers. Inaddition, there are allegations that a systemof blacklisting complaining employees existsso that, even though no direct action istaken against them by the employercomplained of, they find it impossible to getwork from any employer in the area inwhich they live. Not surprisingly, I have nodirect evidence that such practices exist, butthe Construction Industry MonitoringAgency expressed no surprise at thesuggestion that they might.

Income Continuance Plans

In the Digest of Cases for this year, I quotethe case of a pension scheme member whowas receiving income continuance benefitunder a plan run in parallel to the pensionscheme. In the report on that case, Istrongly urged sponsoring employers andtrustees to cater specifically under pensionscheme rules for those on incomecontinuance benefit, and not to rely on thead hoc use of temporary absence provisions,which are sometimes vaguely worded andoften discretionary, to deal with situationsthey were not designed to cater for.

Income continuance plans themselves arenot within my remit, but the interaction ofthese plans with pension schemes inevitablymeans that they come to my notice. Undergroup plans which do not need Revenueapproval, the employer is generally theinsured person, who becomes entitled to thebenefit when an employee becomes disabled,and pays this benefit on to the member as ifit were pay. There is often, but not always,a provision which enables membership ofthe pension scheme to be continuedwithout cost to the employer or themember. Modern insurance contracts


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require the continuation of the employmentcontract in order for benefits to continue tobe paid. However, certain older policies,under which benefits may still be inpayment to some individuals, did notrequire this, so we are left with a ratherbizarre situation. In many cases the workerwas actually dismissed or made redundant,but is nevertheless, to all intents andpurposes, an ‘active’ member of the scheme,continuing to accrue benefits within it,though not satisfying the statutorydefinition of ‘active member’ under thePensions Act. This is completelyunsatisfactory.

It is, moreover, the case that, because theemployer in these plans is the beneficialowner of the policy, these arrangements arealso outside the remit of the FinancialServices Ombudsman, and therefore there isno redress available to anyone who feelsthat he has been mistreated under one ofthese plans. I can deal only with a pensionscheme which may interact with an incomecontinuance plan, but not with theoperation of the income continuance planitself. These plans do not fall under thesupervision of the Pensions Board either, sothis sector of activity in employee benefitsis, in effect, unregulated.

PUBLIC SERVICE PENSIONS ISSUES

Supplementary Pensions

Another area I have come across during theyear was entitlement to what is known inthe public service as a SupplementaryPension. This is an additional pensionpayable in certain circumstances to anemployee who is fully insured under theSocial Welfare Acts and whose occupationalpension is co-ordinated or integrated withwhat is now called the State pension(formerly the contributory old-age pension).

Co-ordination, or integration, is the practicefollowed to ensure that the occupationalpension, when added to the Social Welfarepension, equals the occupational pensionthat would be paid to a similarly-qualifiedpublic servant paying the lower modifiedrate of PRSI, who is not entitled to a SocialWelfare pension. There may be situationswhere the retired member fails, through nofault of his own, to qualify for any SocialWelfare benefit (e.g. disability benefit,unemployment benefit, State pension, etc.)or qualifies for a Social Welfare benefit atless than the full personal rate of the Statepension payable to a single person withoutdependants. In these situations, asupplementary pension may be payable tobridge the gap.

This is an important feature of most publicservice pension schemes but appears to belittle known to many members. An exampleof this during the year related to an elderlywidow who was in receipt of a very smallintegrated public service pension. Whenattempting to explain to her howintegration works, my investigatordiscovered that she was only receiving amuch reduced rate of contributory old-agepension. On enquiry with theadministrators of the scheme, it wasconfirmed that a Supplementary Pensionwas provided for under the rules, but no onehad ever informed this lady, even thoughshe had queried her small pension withthem on a number of occasions. Publicservice pension administrators need toensure that scheme members paying fullPRSI are aware of this very importantprovision.

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Information

On a more general note, I commented onthe ‘information gap’ in public servicepension scheme administration in my 2004Annual Report and endorsed theCommission on Public Service Pensionsrecommendation that an active policy ofpension scheme communication beimplemented, involving the provision ofuser-friendly scheme documentation, annualbenefit statements and details of optionsavailable to members to improve theiroverall level of benefits and to plan for theirretirement. While some progress is beingmade on this, I remain concerned at theslow pace of such reform. I am not certainthat the new Disclosure Regulations, whichpermit public authority schemes todisseminate information by drawingattention to electronic access, is anunqualified advantage.

Transfers - Funded Schemes

In the Public Transfer Networks, there aregenerally several options available in caseswhere an employee wishes to transfer hisservice from one participating employer toanother. The option most favoured is ‘knockfor knock’, where no money changes handsbetween the schemes, but the receivingscheme accepts the liability for the previousservice. This generally works well in large,unfunded public service schemes. The otheroptions available are transfer payments, orongoing payments after the retirement ofthe employee concerned.

In all cases, however, it is up to theparticipating employers to agree, on abilateral basis, which of the availableoptions will apply to transfers between anytwo organisations. In one particularinstance, there are two semi-state bodies,each with a funded scheme. An employeewishes to transfer his service but is unable

to do so, because the first employer has a‘knock for knock’ philosophy. The secondemployer, although a semi-state body, doesnot enjoy any protection for its fundedpension scheme from the State and istherefore unwilling to accept the liability forthe transfer of service unless it receives atransfer value payment. In my view, thereshould not be any suggestion of ‘knock forknock’ between funded schemes. To theextent that these schemes have beenexempted from the provisions of Part III ofthe Pensions Act (i.e. Preservation andTransfer), I would question whether theyshould be so exempt, given that they do notfulfil the basic criterion for exemption – thatwhat they offer is at least as good as theprovisions contained in the Pensions Act. Inschemes that are subject to Part III, amember has a right to require a transfervalue to be paid on to another scheme,whose trustees may not refuse it (althoughthey may decide what credit it earns in theirscheme).

Pension Abatement

It was brought to my attention during 2005that a Government Department had issueda revised letter to organisations and agenciesunder its aegis regarding the method ofapplying abatement provisions. Abatementof pension is intended to ensure that thetotal income, from salary and pension, of apensioner who becomes re-employed in thesector from which he retired, does notexceed the income he would have had if hehad not retired. Traditionally, the extent ofabatement depends on the period ofemployment and the amount of workperformed in that period. The nature of thecomplaints brought to my attention relatedto a change to this traditional approach byinsisting that abatement be applied on anhourly basis in all cases. This had the effectof ensuring that the pension wouldinevitably be abated regardless of the periodof employment.


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I raised this matter directly with theDepartment of Finance who confirmed tome that the Department in question hadnot cleared the instruction to abate on anhourly basis through them. Following somefurther discussion the Departmentconcerned issued a revised circular, in effectreturning to the status quo of abating in linewith the public service norm, i.e., reckoningabatement over the period of employment.

As part of the discussion on abatement Iraised a number of points generally with theDepartment of Finance. I noted that theapplication of abatement can prove counter-productive, in that it discouragesexperienced and well trained staff fromreturning to an employment where they areclearly needed. I also noted the anomalousposition that abatement appears to onlyapply to re-employment in the same sector.Therefore, using the nursing example, anurse retired from a hospital to which theLocal Government Superannuation Scheme(LGSS) applies, would have her pensionabated if she were to be re-employed by anyhospital to which the LGSS applies, but nota hospital to which the Voluntary HealthSuperannuation Scheme (VHSS) applies. Yetboth are public sector pension schemes.Equally, if the same nurse was to be re-employed via an agency (and the hospital orHealth Board paid the agency directly)abatement of pension would not apply.

Break in Service

One interesting case I looked at early in2005 related to a complaint that anorganisation to which the LocalGovernment Superannuation Scheme(LGSS) applies erred in placing thecomplainant on Class A social insurance onher appointment to a permanent andpensionable position and the effect this hadon (a) her pension entitlements under theLGSS and (b) the cost to her of her liabilityto reckon previous temporary service.

On examination, it became apparent thatthis was more a question as to the properinsurability of the employment for PRSIpurposes than a pensions issue per se. Theindividual in question had had a number ofsmall ‘breaks in service’ during which sheclaimed unemployment benefit.

While an employer is defined as a ‘personresponsible’ for the management of apension scheme for the purposes of aninvestigation by me, this should only be inconnection with the pension scheme itself.Complaints relating to employees’contractual rights, or their treatment underemployment law or Social Welfareregulations, are matters for industrialrelations remedies, through other properlyconstituted bodies or the Courts. Sincedecisions as to insurability of employmentare more appropriate to the Department ofSocial and Family Affairs, I referred thematter to Scope Section of thatDepartment. Scope Section is the section ofthe Department responsible for deciding oninsurability of employment issues inaccordance with the law and any decisionthey make is then open to appeal to theSocial Welfare Appeals Office, which is anindependent body. In making the referral, Iasked about the definition of ‘break-in-service’ being used by Scope Section andwhether the fact that a person simply had‘credits’ on his or her social insurance recordnecessarily meant a break in service withinthe ordinary meaning of employmentlegislation.

The Deciding Officer in Scope Section foundthat the complainant did not in fact have abreak in service. He explained that casualclaims of unemployment benefit do notconstitute a break in service under the SocialWelfare (Consolidated Contributions andInsurability) Regulations, 1996, S.I. 312/96,the governing Regulations. He also notedthat the original decision by the employer toplace the individual on Class A socialinsurance was not based on a formal

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decision by Scope Section, but rather as aresult of a general enquiry to a RegionalOffice of the Department. Trustees andadministrators should note that DecidingOfficers from Scope Section are responsiblefor making statutory decisions on questionsconcerning the insurability of anemployment based on the evidencesubmitted, in accordance with the law, andas provided for under Section 247(2) of theSocial Welfare (Consolidation) Act, 1993.

As a result of this decision, a revisedcalculation of liability for pensioncontributions issued for the complainantwhich reflected the fact that she wasinsurable under a modified class of socialinsurance. This decision may well haveimplications for similar cases in other publicservice areas which have similar provisionsin their pension schemes.

Administrative Circulars

I would like to say something about thelegal structure (the “constitution”, as it iscalled in the Pensions Act) of public sectorpension schemes generally.

These schemes are usually authorised bystatute and made by secondary legislation inthe form of statutory instruments.Occasionally, older schemes may be createdby statute and amending schemes are givenstatutory force by complying with specifiedconditions. With the notable exception ofthe Local Government SuperannuationScheme, however, it is extremely rare to seepublic sector schemes in general amended bylegislation. Usually, change is effected byextra-statutory devices in the form ofadministrative circulars, while the making ofnew statutory instruments to give formaleffect to change may be indefinitely delayed.

Much has been written about the place ofthese circulars in the administrative

machinery, their effects, their advantagesand the pitfalls attending them. From astrictly legal standpoint they are hard tojustify, as they seem to usurp the powers ofthe legislature where they purport to amenddocuments created by a statutory process.On a practical level, they are useful, inenabling administrators to give effect toagreed changes in policy without havingimmediately to engage in the tortuousprocess of revising – in effect, completelyreplacing – existing statutory instruments.

Not all circulars are amending documents.Some are merely explanatory. Some areprescriptive, seeking to direct or shape theway in which powers – often technicallydiscretionary – will be used in practice.Some exhibit all three characteristics.

I have a problem with the widespread use ofcirculars, particularly as they affect schemeamendments. In many cases, the existenceof a circular seems to be regarded as asubstitute for amending the rules of ascheme. We are everywhere reminded thatthe contents of Superannuation Handbooksetc. cannot override scheme rules orregulations - but in many cases these havenot been brought up to date, possibly manyyears after the changes they are supposed todocument have been put into force. Ineffect, the temporary nature of suchcirculars seems to have been forgotten, andthey are now substitutes for revisedregulations. This brings anomalies, in thatwe sometimes find that, because thedetailed amending regulations have not beenmade, the formal rules of a scheme provideno guidance as to what should happen inparticular circumstances, and generalannouncements made to members have notcovered the problem in question.


30

In certain cases, where there are fundedpension schemes in the public service, thereexists also a trust deed and rules, as well as astatutory instrument, or ‘regulations’ for ascheme. In principle, the deed and rulesreflect exactly what is in the regulationsbut, if the latter are not updated, the formercannot be updated either, even though themaking of an amending deed is astraightforward process. I believe that itshould be possible to replace thecumbersome system of statutoryinstruments by a simpler process whichwould make it possible to amend the rulesof a scheme without unnecessary delay.

I am most unhappy about the use ofcirculars to limit the effect of discretionarypowers, particularly if they purport to do soon a ‘blanket’ basis. In principle, attempts tofetter the effects of discretionary powers inanticipation of their use cannot be justified.For example, in the case of a discretionarypower to modify the effects of abatement ofpension in certain circumstances, it wasclearly the original intention of theOireachtas that such powers should be usedon a case-by-case basis, taking into accountthe particular circumstances of each, tofacilitate the better management of theservice. A circular advising that the powershould be used only in relation to certainjobs and/or grades is not just ill-advised – itis in my mind ultra vires and therefore nulland void.

I would recommend the utmost caution inthe drafting of circulars generally, and I amcertain that it is dangerous to rely oncirculars as a substitute of indefiniteduration for amending the rules of ascheme.

A N N U A L R E P O R T 2 0 0 5

31

The content of this report is a combinationof good news and bad news. The fact thatthe number of complaints to this Office issteadily increasing is a mixture of both –good, that more people are availing of theservice; bad, that there is more to complainabout; good, because so much is successfullymediated; bad, because it’s taking longer todeal with the complaints we receive.

This is, in fact, one of the big worries. Notonly is it taking longer to clear complaintcases, but the job of simply running theOffice is also suffering. I have mentionedvarious plans that we have in mind – aCustomer Charter, a revamped website anda new complaints tracking system, amongother things. All of these take time to plan,to draft, to put out to tender wherenecessary, and to implement – time that, atpresent, we simply haven’t got.

Because there are so few of us, we have totry to balance the activities involved inrunning the Office itself, and of fielding thenumerous enquiries, with the investigationand determination of complaints.

The biggest problem continues to be thetime taken to clear complaint cases. This isnot just a problem for us – it affectscomplainants, who must wait for longer forthe outcome of their cases to become clear.It affects respondents, for the same reason.But critically, it could increase the cost ofputting things right. Justice delayed maywell be justice made more expensive.

I will not accept a lower standard of service.Some of our determinations are verydetailed. In a complex case, in fairness to allsides, this is as it should be. I believe thateveryone, complainant and respondent, isentitled to know exactly why a case isdecided in a particular way. I also believethat detailed reports are invaluable in theevent of an appeal to the High Court.

If that standard is to be maintained, thenthe answer is clear. We need to increaseresources, and quickly. I will shortly putforward a detailed proposal forconsideration. I hope that, for the sake of aservice which has achieved a great deal, andcan achieve much more, that proposal willbe treated with the seriousness it deserves.


Section 5

Conclusion

32

The Exchequer through the Department of Social and Family Affairs funds the Office of thePensions Ombudsman. The Office acknowledges the ongoing support of the Department ofSocial and Family Affairs in relation to its Accounts and Payroll obligations.

ANNUAL ACCOUNTS FOR 2004

The most recent audited accounts are for the financial year 2004 and these are set out inAppendix 6 to this report.

ANNUAL ACCOUNTS FOR 2005

The financial statements for 2005 are subject to audit by the Comptroller and Auditor Generaland after audit will be presented to the Minister for Social and Family Affairs for presentationto the Oireachtas. Pending audit by the Comptroller and Auditor General the provisional costsof running the Office in 2005 are as set out in Table 6.1.

A N N U A L R E P O R T 2 0 0 5

Section 6

Financial Accounts

33

68%

10%

0.5%

2%0.5%

19%

Table 6.1 - Costs of Running the Office in 2005

2005€

Staff Costs 502,541

Incidental Expenses 70,902

Postage/Telecommunications 1,306

Printing/Stationery 14,469

IT/Office Equipment 939

Office Premises Expenses 143,248

Total Running Costs 733,405


Appendix 1

Staffing 2005

34 Caitriona CollinsInvestigator

Gerard HughesInvestigator

Joan BrayInvestigator

Jean O’TooleOffice Manager

Michelle O’KeeffeClerical Officer

Martina BrennanClerical Officer

Kevin LonerganHead of Investigations


LOCATION 2004 2005

Carlow 5 3

Cavan 0 2

Clare 5 6

Cork 39 53

Donegal 7 5

Dublin 107 130

Galway 11 22

Kerry 5 13

Kildare 11 18

Kilkenny 6 4

Laois 2 6

Leitrim 3 2

Limerick 11 21

Longford 0 1

Louth 3 7

Mayo 8 10

Meath 11 18

LOCATION 2004 2005

Monaghan 2 4

Offaly 5 1

Roscommon 1 1

Sligo 3 11

Tipperary 14 7

Waterford 7 8

Westmeath 1 7

Wexford 7 10

Wicklow 12 10

Australia 0 1

New Zealand 1 0

Spain 1 0

United Kingdom 5 7

United States 2 1

Address not known 2 0

Overall Total 297 389

A N N U A L R E P O R T 2 0 0 5

Appendix 2

Breakdown of Complaints by County 2004 & 2005

35

Nature of Complaint 2004 Total

OTOR 53 18%

Post-retirement increases 50 17%

Failure of scheme to respond 28 10%

Membership/entry conditions 20 7%

Remittance of employee contributions 17 6%

Calculation of benefits 16 5%

Disclosure of information 14 5%

Incorrect/late/no payment 14 5%

Transfers 11 4%

Additional voluntary contributions 10 3%

Calculation of years of service 8 3%

Winding-up 8 3%

Early retirement 7 2%

Spouses’ and dependants’ benefits 7 2%

Preservation of benefits 5 2%

Contribution refunds 4 1%

Ill health 4 1%

Incorrect info resulting in financial loss 4 1%

Mis-selling 4 1%

Payment of employer contributions 4 1%

Use of surplus 3 1%

General enquiry 2 1%

Commutation of pension 2 1%

Defined Benefit V Defined Contribution 1 0%

Equal Treatment Issue 1 0%

Total 297 100%

Nature of Complaint 2005 Total

OTOR 65 17%

Remittance of employee contributions 63 16%

General enquiry 31 8%

Membership/entry conditions 30 8%

Post-retirement increases 26 7%

Calculation of benefits 25 6%

Failure of scheme to respond 23 6%

Incorrect info resulting in financial loss 18 4%

Transfers 18 4%

Incorrect/late/no payment 14 4%

Disclosure of information 11 3%

Calculation of years of service 9 2%

Spouses’ and dependants’ benefits 9 2%

Early retirement 7 2%

Additional voluntary contributions 6 2%

Ill health 6 2%

Preservation of benefits 6 2%

Augmentation/enhancement of benefits 5 1%

Payment of employer contributions 5 1%

Winding-up 4 1%

Contribution refunds 3 1%

Defined Benefit V Defined Contribution 3 1%

Equal Treatment Issue 1 0%

Mis-selling 1 0%

Total 389 100%


Appendix 3

Nature of Complaints 2004 & 2005

36

Case Flow Summary 2005

On Hand at Start of the Year 287

Received during the Year 389

Total for Year 676

Closed during the Year 385

On Hand at End of the Year 291

Summary of File Closures

Number of Files Closed 385

Average Weeks to Closure 32.31

Longest Weeks to Closure 140.71

Shortest Weeks to Closure 0.00

Closures by Decision Reason Number % of Total

Successful mediation 95 25%

Final Determination – Complaint not upheld 52 14%

Unsuccessful mediation 51 14%

OTOR - Other Ombudsman/Regulator/Organisation 32 8%

OTOR - Out of time 30 8%

Advised re IDR - no further contact 28 7%

Complaint not proceeded with 24 6%

Final Determination - Complaint upheld 24 6%

General advice given 19 5%

OTOR - Not in PO remit - miscellaneous reason 16 4%

OTOR - Social Welfare complaint 13 3%

OTOR - Group complaint 1 0%

Total 385 100%

A N N U A L R E P O R T 2 0 0 5

Appendix 4

Case Flow Summary and Analysis of FileClosures for 2005

37

Number of Weeks to Closure

Less than 5 weeks 89 23%

5 – 10 weeks 32 8%

10 – 15 weeks 37 10%

15 – 20 weeks 22 6%

20 – 25 weeks 24 6%

25 – 30 weeks 17 4%

30 – 35 weeks 18 5%

35 – 40 weeks 12 3%

40 – 45 weeks 10 3%

45 – 50 weeks 14 4%

Greater than 50 weeks 110 28%

Total 385 100%


38

Month 2005 % of Total

January 31 8%

February 42 11%

March 35 9%

April 33 8%

May 46 12%

June 31 8%

July 26 7%

August 27 7%

September 25 6%

October 25 6%

November 49 13%

December 19 5%

Total 389 100%

A N N U A L R E P O R T 2 0 0 5

Appendix 5

Number of Complaints Received by Monthduring 2005

39

31

42

3533

46

31

26 2725 25

49

19

Num

bers

Rec

eive

d

Month

0

10

20

30

40

50

DECNOVOCTSEPAUGJULJUNMAYAPRMARFEBJAN

REPORT OF THE COMPTROLLER ANDAUDITOR GENERAL FORPRESENTATION TO THE HOUSES OFTHE OIREACHTAS

I have audited the financial statements onpages 42 to 46 under Section 143(2) of thePensions Act, 1990 as amended.

RESPECTIVE RESPONSIBILITIES OFTHE PENSIONS OMBUDSMAN AND THECOMPTROLLER AND AUDITORGENERAL

The Pensions Ombudsman is responsibleunder Section 143 of the Pensions Act, 1990as amended for the preparation of thefinancial statements of the Office of thePensions Ombudsman. It is myresponsibility, based on my audit, to forman independent opinion on the financialstatements presented to me and to report onthem.

I review whether the statement on thesystem of internal financial control on page41 reflects the Ombudsman’s compliancewith applicable guidance on corporategovernance and report any material instancewhere the Ombudsman does not do so, or ifthe statement is misleading or inconsistentwith other information of which I am awarefrom my audit of the financial statements.

BASIS OF AUDIT OPINION

In the exercise of my function asComptroller and Auditor General, Iconducted my audit of the financialstatements in accordance with auditingstandards issued by the Auditing PracticesBoard and by reference to the specialconsiderations which attach to State bodiesin relation to their management andoperation.

An audit includes examination, on a testbasis, of evidence relevant to the amountsand disclosures in the financial statements.It also includes an assessment of thesignificant estimates and judgments made inthe preparation of the financial statements,and of whether the accounting policies areappropriate to the circumstances of theOffice, consistently applied and adequatelydisclosed.

I planned and performed my audit so as toobtain all the information and explanationsthat I considered necessary to provide mewith sufficient evidence to give reasonableassurance that the financial statements arefree from material misstatement whethercaused by fraud or other irregularity or error.In forming my opinion I also evaluated theoverall adequacy of the presentation ofinformation in the financial statements.

OPINION

In my opinion, proper books of account andrecords have been kept by the Office of theOmbudsman, and the financial statements,which are in agreement with them, give atrue and fair view of the state of affairs ofthe Office of the Pensions Ombudsman at31 December 2004 and of its income andexpenditure for the year then ended.

John PurcellComptroller and Auditor General

30 December 2005


Appendix 6

Financial Statements for year ended 31December 2004

40

RESPONSIBILITY FOR THE SYSTEM OFINTERNAL FINANCIAL CONTROL

The Office of the Pensions Ombudsman is asmall Office in one unit. There is a totalstaff of 8, including the Ombudsman, aHead of Investigations, three investigators,an office manager and two further officials.The responsibility for ensuring that aneffective system of Internal Controls ismaintained and operated falls to myself, asOmbudsman.

The system can only provide reasonable andnot absolute assurance that assets aresafeguarded, transactions authorised andproperly recorded, and that material errorsor irregularities are either prevented orwould be detected in a timely period.

The staff of this Office and I have takensteps to ensure that there is an effectivesystem of financial control in place, byimplementing a system of internal controlbased on regular information on expenditurebeing supplied to management,administrative procedures includingsegregation of duties, and a system ofdelegation of responsibility. This includesthe following procedures:

An annual estimate of financialrequirements is provided to ourparent Department, the Departmentof Social and Family Affairs.

A twice yearly report is provided tothe Department which comparesestimated and actual expenditure.

All expenditure by this Office isrecorded on the Department’s generalledger accounting system. A monthlyexpenditure report is prepared by theDepartment’s Accounts branch. Thisis then checked by the office manageragainst the records held in the Office.

The office manager prepares amonthly statement of expenditurewhich compares estimated and actualexpenditure. This is circulated to allmembers of staff and is reviewed bymyself.

A segregation of duties exists betweenthe preparation, authorisation andexecution of payments.

An internal audit function will beprovided by the Department of Socialand Family Affairs.

I confirm that I reviewed the Office’ssystem of internal financial control duringthe year 2004.


22 December, 2005.

A N N U A L R E P O R T 2 0 0 5

Statement on Internal Financial Control

41

1. BASIS OF PREPARATION

The financial statements are preparedon an accruals basis, except asoutlined below, in accordance withgenerally accepted accountingprinciples under the historic costconvention and comply withapplicable financial reportingstandards and with the requirementsof Section 143 of the Pensions Act1990 (inserted by Section 5 of thePensions (Amendment) Act, 2002).

2. OIREACHTAS GRANTS

Oireachtas Grant represents the totalof payments made by theDepartment of Social and FamilyAffairs on behalf of the Office in theyear of account.

3. PENSIONS

The employees of the PensionsOmbudsman, being Civil Servants,are covered by Civil Service pensionarrangements with the exception ofthe Pensions Ombudsman who isappointed by the Minister for Socialand Family Affairs. The pensionentitlements of the PensionsOmbudsman have not yet beenfinalised.

4. TANGIBLE FIXED ASSETS

Tangible Fixed Assets are stated atcost or valuation less accumulateddepreciation. Depreciation is providedon a straight line basis at rates whichare estimated to reduce the assets torealisable values by the end of theirexpected useful lives as follows:

IT and Office Equipment20% Straight Line

Furniture and Fittings10% Straight Line

5. CAPITAL ACCOUNT

The Capital Account balancerepresents the unamortised value ofincome applied for capitalexpenditure.


Statement of Accounting Policies

42

NOTES 2004 2003*

€ €

Income

Oireachtas Grant 1 500,893 341,582

Transfer (to)/from Capital Account 5 4,578 (116,112)

Total Income 505,471 225,470

Expenditure

Staff Costs 2 379,547 129,074

Administration 3 105,858 78,190

Depreciation 4 20,368 18,206

Audit Fee 3,000 -

Loss on Disposal of Fixed Assets 1,178 -

Total Expenditure 509,951 225,470

Excess of Expenditure over Income 4,480 -

* 28 April to 31 December 2003

The Office of the Pensions Ombudsman had no gains or losses in the financial year other thandealt with in the Income and Expenditure Account.

The Statement of Accounting Policies and Notes 1 to 6 form part of these financialstatements.


22 December, 2005.

A N N U A L R E P O R T 2 0 0 5

Income and Expenditure AccountFOR THE YEAR ENDING 31 DECEMBER 2004

43

Note 2004 2003 € €

Fixed Assets

Tangible Fixed Assets 4 111,534 116,112

Current Assets

Debtors and Prepayments 2,316

Cash on Hands 11 100

2,327

Current Liabilities

Creditors & Accruals (6,807) (100)

(6,807) -

Net Assets 107,054 116,112

Represented By

Excess of Expenditure over Income (4,480) -

Capital Account 5 111,534 116,112

107,054 116,112

The Statement of Accounting Policies and Notes 1 to 6 form part of these financialstatements.


22 December, 2005.


Balance Sheet AS AT 31 DECEMBER 2004

44

1. OIREACHTAS GRANT

Funding for the Office of the Pensions Ombudsman is provided by the Department ofSocial and Family Affairs which makes all payments on behalf of the Office. The totalincome of the Office matches the sum charged to the Appropriation Account of theSocial and Family Affairs Vote – €500,893 in 2004.

2. STAFF COSTS

The Staff Costs of the Office of the Pensions Ombudsman comprise

2004 2003€ €

Wages and Salaries 371,147 127,985

Travel & Subsistence 8,400 1,089

379,547 129,074

The number of staff employed by the Office in 2004 was 8, including the Ombudsman.

3. ADMINISTRATION COSTS

The Administrative Costs of the Office of the Pensions Ombudsman were

2004 2003€ €

Incidental Expenses 57,422 20,598

Postage & Telecommunications 2,923 475

Printing/Stationery 26,428 8,146

IT/Office Machinery (Non-Asset) 1,409 1,273

Maintenance, Furniture & Fittings (Non-Asset) 17,676 47,698

105,858 78,190

A N N U A L R E P O R T 2 0 0 5

Notes to the Financial Statements

45

4. FIXED ASSETS

IT Furniture TotalHardware & Fittings

€ € €

Assets at Cost Balance as at 1 January 2004 47,735 86,583 134,318 Additions 7,594 9,374 16,968 Disposals (1,473) - (1,473) Balance as at 31 December 2004 53,856 95,957 149,813

Depreciation ChargeBalance as at 1 January 2004 (9,547) (8,659) (18,206)Charge for the Year (10,772) (9,596) (20,368)Disposals 295 - 295Balance as at 31 December 2004 (20,024) (18,255) (38,279)

Net Book ValueBalance as at 1 January 2004 38,188 77,924 116,112Movement for the Year (4,356) (222) (4,578)Balance as at 31 December 2004 33,832 77,702 111,534

5. CAPITAL ACCOUNT

€ €

Balance as at 1 January 2004 116,112

Profit/(Loss) on Disposal of Fixed Assets 2004 (1,178)

Purchase of Fixed Assets 16,968

Amortisation in line with Asset Depreciation (20,368)

Transfer to Income and Expenditure Account (4,578)

Balance as at the 31 December 2004 111,534

6. PREMISES

The accommodation occupied by the Office of The Pensions Ombudsman at 36 UpperMount Street, Dublin 2 is leased and paid for by the Office of Public Works. There is nocharge to the Office of the Pensions Ombudsman in respect of accommodation.Expenditure on premises incurred by the Office of Public Works on behalf of thePensions Ombudsman amounted to €172,500.


N OT E S TO T H E F I N A N C I A L S TAT E M E N T S

46

Pensions Act, 1990

Pensions (Amendment) Act, 2002

Social Welfare (Miscellaneous Provisions) Act, 2003

Statutory Instrument No. 119 of 2003




Public Service Superannuation (Miscellaneous Provisions) Act, 2004

Social Welfare (Miscellaneous Provisions) Act, 2004

Social Welfare Law Reform and Pensions Act, 2006

A N N U A L R E P O R T 2 0 0 5

Appendix 7

Governing Legislation

47

What can the Pensions Ombudsman do for you?

Disputes Resolution Procedures – Guidance Notes for Trustees and Administrators

Instructions and Guidance for Respondents

Statement of Strategy 2004 – 2006

Understanding Pensions – The Friendly Guide to Pensions1

All publications are available free of charge on request to the Office

1 Understanding Pensions was written by Paul Kenny in a private capacity and publication was sponsored in 2004by the Department of Social and Family Affairs. Copyright is by the Retirement Planning Council of Irelandand the Irish Association of Pensions Funds.


Appendix 8

Publications of the Office

48

2005...Savings Accounts (PRSAs). OFFICE OF THE PENSIONS OMBUDSMAN 2 Foreword 5 Section 1 -...

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