Pensions Ombudsman Determination: Mr G on behalf of The Estate of Mrs P (CAS-85140-P4M5)

What was the background?

Mr G, as administrator of Mrs P’s estate, complained against the trustees of the European Metal Recycling Limited Pension and Life Assurance Scheme. Mrs P had received a spouse’s pension, including guaranteed minimum pension (GMP), following her husband’s death in 1996, but payments ceased in about 2001 for reasons which could not be established. After her death in 2020, the trustees paid arrears comprising six years of excess pension and eight years of GMP, exercising what they considered to be a discretionary forfeiture power under section 25(b) of the Scheme’s rules.

Following the Scheme’s internal dispute resolution procedure, Mr G referred the complaint to the Pensions Ombudsman. He contended that the estate was entitled to all arrears from 2001 and that the trustees could not use the Scheme’s forfeiture provision to defeat Mrs P’s statutory and trust-law rights. The trustees maintained that the statutory regime permitted forfeiture, that section 25(b) conferred the necessary power and that they had properly exercised their discretion after investigating why the payments had ceased.

In a final determination dated 8 May 2026, the Pensions Ombudsman, Dominic Harris, had to decide whether statutory provisions permitted forfeiture of the arrears and, if so, whether section 25(b) was legally effective as a forfeiture clause. Subsidiary issues were whether Section 21(1)(b) of the Limitation Act 1980 prevented forfeiture, whether Mrs P retained any statutory transfer entitlement under Section 95(2) of the Pension Schemes Act 1993, and whether the excess pension and GMP were subject to different permitted forfeiture periods.

What did the Ombudsman decide?

The Ombudsman held that the statutory regime permitted, but did not itself effect, forfeiture. Section 92(5)(b) of the Pensions Act 1995 (PA 1995) allowed forfeiture where a pension claim was not made within six years after payment became due. Regulation 26 of the Occupational Pension Schemes (Schemes that were Contracted-out) (No 2) Regulations 2015 similarly permitted forfeiture of GMP payments unclaimed for at least eight years. Accordingly, the trustees could forfeit the relevant arrears only if the Scheme’s rules contained an effective forfeiture power.

Section 21(1)(b) of the Limitation Act 1980 did not prevent trustees from relying on a valid scheme forfeiture clause. Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc [2018] EWHC 2839 (Ch) and Punter Southall Governance Services Limited Group Pension Trust Ltd v Jonathan Hazlett [2021] EWHC 1652 (Ch) established that pension arrears could be forfeited where the governing rules clearly authorised that result, irrespective of whether the beneficiary was at fault for failing to claim. The Ombudsman also rejected reliance on Section 95(2) of the Pension Schemes Act 1993 because Mrs P’s pension had entered payment and she therefore no longer had a statutory transfer right.

The decisive issue was whether section 25(b) of the Scheme’s rules extinguished or suspended the beneficiary’s entitlement before allowing the trustees to use unclaimed money for Scheme purposes. Applying Punter Southall and CMG Pension Trustees Ltd v CGI IT UK Ltd [2022] EWHC 2130 (Ch), the Ombudsman held that a forfeiture provision must contain operative wording which clearly deprives the beneficiary of the benefit. Although section 25(b) was headed ‘Forfeiture’, its operative wording merely permitted the trustees to use money unclaimed for six years; it did not extinguish, forfeit or time-bar the underlying entitlement.

The wording was materially similar to the ineffective provision considered in Punter Southall, rather than the effective provisions in Lloyds and CMG. The heading and the reference to applying money for the Scheme’s purposes could not supply the missing operative language, particularly where the original reason for stopping Mrs P’s pension was unknown and her case was more appropriately treated as an underpayment than as a straightforward missing-beneficiary case. The complaint was upheld. The trustees were directed to pay all outstanding pension and GMP arrears from 2001, with simple interest at the Bank of England base rate from each payment’s due date until payment.

What are the practical implications of this case?

This determination reminds us that identification of what actually constitutes a forfeiture rule in scheme rules is not always straightforward. The label “forfeiture” itself will not be determinative of the issue – and was expressly ruled here not to be decisive given the substance of the rule meant the trustees were merely entitled to use the unclaimed money without extinguishing the member’s actual entitlement.

The Ombudsman has also made a distinction between a situation where the underpayment occurs because there is a missing beneficiary and one where the benefit has been underpaid.

The decision effectively reinforces the decision in Punter Southall Governance Services Limited Group Pension Trust Ltd -v- Jonathan Hazlett [2021] EWHC 1652 (Axminster Carpets) with the Ombudsman noting the similarity of the forfeiture clause in that case but arguably going even further in this determination, given the clause was, unlike in Axminster, labelled “forfeiture”. This shows that legal practitioners will need to look closely at the substance of a clause – and to achieve forfeiture, the Ombudsman has made clear a clause needs to be explicit about depriving a member’s right to the pension.

Practitioners need to be vigilant in assessing the nature of a forfeiture clause as well as the circumstances in which an underpayment has arisen, given this trend, following the Axminster decision, to take a more cautious approach where a pension payment was stopped for reasons unknown and apparently following administrative error, rather than where there has been a missing beneficiary.

The wording in the purported forfeiture provision in this determination was strikingly similar to that in the Axminster case, so it is perhaps not surprising the Ombudsman reached the conclusion he did. There might be future determinations where the position is less clear-cut. In the meantime, with many schemes preparing for buy-outs, it would be worth assessing whether forfeiture rules generate any room for debate as in this case.

Ben’s article was originally published in LexisNexis, here.