KPMG to reinstate divorcee's pension following legal blunder

22 January 2019 Consultancy.uk

Big Four firm KPMG has been told it must reinstate a £32,173 pension to its original beneficiary, following its wrongful transfer to an ex-wife. The firm, which administrates transfers for defined benefit pensions of the Rettig UK Pension Scheme had made the transfer due to unclear wording in a court sentence.

The UK Pension Ombudsman has upheld a complaint to reinstate the pension of a man whose fund was allocated to his ex-wife, following a divorce. The issue arose when 54% of  'Mr A's' defined contribution (DC) pot, worth £32,173, and 54% of his defined benefit (DB) pension, worth £147,052, transferred to the pension plan of ex-wife Mrs A in May 2014 via KPMG.

According to a pension sharing order from the Rettig UK Pension Scheme, issued in 2013, 54% of a husband’s pension with Rettig should be transferred to his wife. However, with two aspects of pensions being handled in this case, confusion emerged over whether this directive applied to both the DB and DC pensions.

KPMG to reinstate divorcee's pension following legal blunder

As reported by the Financial Times Adviser, while Standard Life administered the scheme, it was Big Four firm KPMG which managed the DB plan and was in charge of the transfers. In January 2014, this saw KPMG ask the lawyer of Mrs A to confirm whether the pension sharing order applied to both. In actual fact, it was only intended to apply to DB pensions, but the reply came that the court order applied to the whole of the pension holding. KPMG subsequently transferred 54% of both the DB and DC pot to Mrs A.

The situation was complicated further because Mr A, whose pension had been drastically reduced, never received a notice of discharge of liability from KPMG, as a result of a change in address. This was in spite of the fact he had reported the matter to one of the trustees of the scheme.

When the matter finally came to light, KPMG explained there was no specific reference to DB pensions in the Rettig sharing order, and argued the document did not state that only one of the pension pots should be transferred. Eventually a judge ruled that there had been no intention to share the Standard Life DC account, but even then, Mrs A refused to restore the money, saying she was not at fault and had relied on the professionals involved.

Now, a year on, Pension Ombudsman Anthony Arter upheld the complaint. He ordered KPMG pay the amount to the complainant, and to also cover legal costs worth £4,775 and pay £500 to the claimant due to significant distress and inconvenience.

Arter said of the case, "In practice KPMG relied only on the advice of a lawyer that it had not instructed, who was acting for Mrs A. I consider that KPMG’s failure to take proper advice on this matter when it identified that the wording was ambiguous amounted to maladministration."

Related: UK Partners of KPMG see bumper payouts despite scandal-stricken year.

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