The Pensions Ombudsman has upheld a complaint against the Royal Mail Statutory Pension Scheme for refusing to pay a deferred pension, providing a salutary lesson for employers who fail to keep adequate records.

Mr Y, who was employed by the Royal Mail Group more than three decades ago between 1979 and 1986, complained to the ombudsman that the scheme had improperly denied him a full deferred pension on retirement, instead paying only his guaranteed minimum pension.

After exhausting internal dispute procedures, Mr Y took the case to the ombudsman. In her determination on January 13 2020, deputy pensions ombudsman Karen Johnston held: “In the absence of any justified reason why Mr Y would have lost his entitlement to a deferred pension, this leads to me to conclude, on the balance of probabilities, that Mr Y is entitled to a deferred pension.”

Because RMG no longer had any employment records for Mr Y and he himself had no documentary proof of his employment, he was told he could only receive GMP benefits and not a deferred pension. The Royal Mail’s practice was to retain these records for six years after an employee had left service before destroying them.

Max Ballad commented:

“Shredding employment files after six years can leave an employer exposed. The decision showed that it is reasonable to keep [employment records] while there is any possibility of a claim from the member or his dependants – in this case, the employee left service more than 30 years ago.

“This decision has wider implications as it is fairly common for GMP reconciliation and rectification exercises to result in a list of members that HM Revenue & Customs says has a scheme GMP, but of whom the scheme has no record.

“The approach is usually to just pay the GMP, but this determination could open up schemes to claims for excess benefits too.”

Read Max’s comments in Pensions Expert.