The Football League Limited Pension and Life Assurance Scheme
The Trustees of the Football League Limited Pension and Life Assurance Scheme
THE COMPLAINT (dated 14 February 2002)
Mr Downes complains of maladministration by the Trustees in failing to provide him with information about how to protect his accrued pension rights. In particular, Mr Downes believes that the Trustees’ failure to advise him of the possibility of being able to take a break in employment of up to 30 days without jeopardising continuous membership, resulted in him not taking advantage of this benefit. Consequently, Mr Downes states that, in respect of his two changes in employment, he could have arranged for a break in employment of less than 30 days and would, therefore, have been in a better position in relation to his accrued pension benefits.
The Explanatory Booklet and Leaflet
The front cover of the Explanatory Booklet states that the booklet describes the general features of the Scheme, with the specific provisions being set out in the Leaflet, issued with the booklet.
The Leaflet explains that a person is eligible to join the Scheme on becoming a relevant employee and providing certain age criteria are met. The reader is advised that the pension is based on the member’s Final Pensionable Earnings and length of Pensionable Service. It also explains that, if the member leaves employment with his employing Club, otherwise than for the purpose of entering into employment with another Club, membership of the Scheme will cease.
The Explanatory Booklet says that a member is entitled to a preserved pension after leaving the Scheme and upon retiring. The Leaflet explains that this will be related to the Member’s Final Pensionable Earnings and Pensionable Service at the date of leaving the Scheme. The Leaflet also explains that “Final Pensionable Earnings” are the average of the member’s highest three consecutive Pensionable Earnings in the last ten years before Normal Retiring Date, or the date of leaving the Scheme, if earlier.
The Rules of the Scheme
The Rules define “Pensionable Service” as “service as a Member with any of the Clubs …”. “Member” means “a person who has become a member of the Scheme and who has not ceased to be a Member by becoming a Deferred Pensioner or Pensioner or otherwise under the provisions of the Deed”.
Mr Downes is a coach who has worked for various clubs in the Premier League and Football League which participate in the Scheme. Mr Downes was employed by Aston Villa FC until June 1991. Mr Downes states that he left Aston Villa on 8 June 1991 by virtue of an agreed settlement. Mr Downes advises that his contract was, in any event, due to cease on 30 June 1991. Mr Downes commenced work with Port Vale FC on 16 July 1991. This employment continued until March 1996. In early June 1996, Mr Downes commenced work with Watford FC. In September 1999, the Scheme was closed to further accrual.
The Trustee explained to me that:
“The Scheme is unusual in that the Inland Revenue have in the past been approached regarding the potentially insecure nature of employment within the Football Industry for some of the members ie Managers, coaches etc, and that a dispensation has been granted such that there could be a break of up to 30 days for the member to secure employment with another club, without loss of continuous service.”
Mr Downes explains he was unaware of the importance of continued service and that it could be maintained with a break of less than 30 days. Mr Downes says that, had he been so aware, he could have negotiated in respect of both periods of service to ensure that he was able to maintain continuous membership. Mr Downes believes the responsibility for making him aware, ultimately lay with the Trustee, which failed in this duty.
Mr Downes also explains that, when he enquired about rejoining the Scheme with effect from the date his employment commenced with Port Vale, he was told he could not rejoin until 1 September 1991, described as being the beginning of the pension year.
The Trustee does not accept that it has an obligation to advise Mr Downes in the manner in which he believes. The Trustee says that the literature provided to Mr Downes when he first joined the Scheme clearly stated that if he left his Club, other than for the purpose of joining another Club, he would cease to be a member of the Scheme. The Trustee also submits:
“… it is at the Club’s discretion as to when they decide to offer an employee membership of the Pension Scheme and for financial and other reasons, membership is not always granted from their date of engagement. It appears from Mr Downe’s case that the new employing club in both instances, did not offer membership of the scheme immediately from the start of his contract.”
The Trustee further submits that the obligation to apply for membership of the Scheme rests with the member and that if he fails to do so immediately upon securing employment, admittance to membership will be on such terms as the Trustee may decide.
The Trustee confirmed the following information in respect of Mr Downes membership:
3 June 1996 – September 1999 (when the Scheme was closed to further accrual)
The Scheme’s actuary has provided the following estimates for the deferred pension to which Mr Downes would be entitled, based on three different assumptions regarding his service.
Total Deferred Pension as at 1/9/1999
Total Deferred Pension as at June 2002 (date of actuary’s letter)
Continuous service from 1 March 1985 to 1 September 1999
Two periods of service – 1 March 1985 to 1 March 1996 and 3 June 1996 to 1 September 1999
Three periods of service - 1 March 1985 to 8 June 1991, 1 September 1991 to 1 March 1996 and 3 June 1996 to 1 September 1999
Mr Downes states that he feels very strongly that it was the responsibility of the Trustee to make him aware of the consequences of a break in service. He considers that the Trustee’s failure to do is negligence and has resulted in reduced benefits.
There is no statutory obligation on the Trustee to provide to Mr Downes the information he feels he should have been given. In addition, the courts have concluded that there is no duty on Trustees to advise a scheme member on how to maximise his or her benefits from the scheme.
The arrangement about the 30 day break, which is said to have been agreed with the Inland Revenue, is not specifically incorporated into the Rules (except in respect of the definition of “Qualifying Employ” which relates to determining the length of membership for the purposes of determining what types of benefits (as opposed to what level) are available upon withdrawing from the Scheme). It seems to me, however, that the arrangement with the Inland Revenue was designed to work, in effect, in arrears – ie. coming into play after the member had rejoined the Scheme and the break in service had been established. I accept that, in some circumstances, a Member who had knowledge of the scheme could seek to avoid having more than a 30 day break between employments. I am, however, conscious that very often coaches and managers of Football Clubs are not in a position to avoid rather longer periods of being out of employment.
The Explanatory Booklet and Leaflet make it clear that the pension is based upon the length of pensionable service. They also state that, upon leaving the relevant Club’s employment, membership and, consequently, pensionable service will cease, although a preserved pension will be available upon retirement based on that service and relevant earnings when the member leaves.
Mr Downes believes the Trustee had a duty to make him aware of the importance of continued service. However, the information contained in the documentation provided to him was sufficient to make him aware that, without continuous service, earlier salary levels would be taken into account in calculating a pension. Having a number of shorter periods of service based on various levels of salary can result in a smaller total benefit than one continuous period of service with the pension calculated on a single, potentially higher salary. This is what the Scheme’s actuary has shown in his estimated pension figures set out in paragraph 13.
The facts as they stand show that Mr Downes had two breaks of service, both in excess of one month. Consequently, Mr Downes is not entitled to continuation of service, even with the benefit of the Inland Revenue arrangement. Mr Downes has pointed to the fact that his first period of service concluded early by agreement and that, had he completed his contracted period of employment, his gap in employment would have been less than one month. Mr Downes is, however, failing to take account of the fact that the only type of service which is relevant for pension purposes (ie. pensionable service) is service while a member of the Scheme. Mr Downes did not recommence his membership of the Scheme with Port Vale until September 1991, over two and a half months after ceasing Scheme membership with Aston Villa. Consequently, a further three weeks employment with Aston Villa would have had no effect on whether or not he was granted continuous service.
I can understand Mr Downes’ disappointment at the effect his relatively small gaps in service will have on his pension. However, as there was no obligation on the Trustee to advise Mr Downes of the arrangement with the Inland Revenue, I cannot find there was maladministration for the Trustee to fail to do so.