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Member communications

Schemes must give their members a variety of communications at different points in time. Giving members incorrect or misleading information can be costly. Here, we look at some of the key principles of good member communications.

The provision of incorrect or misleading information can give members grounds to argue that they are entitled to a greater level of benefits, or to attempt to block a change to benefits that the employer wishes to make. Challenges may relate to issues including estoppel, contract and good faith. Responding to complaints and/or legal challenges can be time-consuming and expensive for trustees and employers, even if members are unsuccessful.

The following principles can help avoid challenges like this, which may otherwise be a drain on employer and trustee resources:

  • Trustees (and employers) should try to keep communications simple (to avoid misunderstandings), accurate (to avoid claims for higher benefits incorrectly quoted) and focused on the facts (to avoid reassuring words or speculation being used against them in the future).
  • Trustees should keep a record of all communications with members. In particular, where the communication has been over the phone or in a meeting, a record of that conversation should be kept and, in some cases, the content of that conversation should be confirmed in writing to avoid misunderstandings.

Here we take a look at some circumstances which have led to challenges to member communications.

Inaccurate scheme booklets – disclaimers

Scheme booklets are intended to give members a brief summary of the benefits that are set out in the scheme’s trust deed and rules. Errors can creep into the booklets, leading members to believe that their benefits will be higher than or different to those set out in the rules.

Members have a legal right to see the trust deed and rules, but in practice a member who wishes to understand their benefits is likely to read the booklet, and is unlikely to request a copy of the trust deed and rules to check that the booklet is correct. For this reason, scheme booklets normally include a disclaimer stating that the rules will prevail in the event of any inconsistency. This wording is vital as the courts have consistently held that it prevents members from successfully arguing that they have relied on the incorrect statement and are therefore entitled to the higher level of benefits or differing entitlement. For the disclaimer to work, it must be clearly expressed and visible, not tucked away in tiny print in a footnote (Steria v Hutchison).

It is worth bearing in mind that even if an incorrect booklet does not confer rights on the member, it may still amount to maladministration. The Pensions Ombudsman may award members compensation for distress and inconvenience (non-financial injustice) resulting from maladministration. To read more about this, visit

Review employer communications

Trustees will not necessarily be protected from a successful claim simply because a communication has been sent by the employer rather than the trustees. The courts have, on occasion, held that the employer has the trustees’ implied authority to send out communications, even if the trustees have not actually seen or authorised that specific document (Steria v Hutchison). To avoid this issue, draft communications to members about pension issues (even where the pensions element forms a small part of the communication, such as in redundancy communications) should be shared between the trustees and employer, avoiding discrepancies in the message to members and ensuring that the statements by the employer are consistent with the scheme’s rules.

Good faith and member expectations

When the employer and trustees are proposing to reduce members’ benefits, or change an existing practice, they must look carefully not just at the communications they are proposing to send, but at communications they have sent in the past. These past communications may, with the best of intentions, have sought to reassure members about further changes to the scheme in the future, or may even have included a statement that is interpreted as a promise or commitment about the future – communications should be drafted to avoid making any such promises or commitments.

An employer has a duty of good faith towards its employees. This is the duty of the employer not to act irrationally or perversely towards its employees. This duty applies both to the employer’s actions towards its pension scheme for its employees and ex-employees, and to the employees’ contracts of employment (Imperial Tobacco). In the IBM litigation, the Court of Appeal said that:

  • a ‘rationality test’ applies – essentially that all relevant factors (and no irrelevant factors) were taken into account, and that the decision was not one that no reasonable decision-maker could reach (ie not perverse or irrational);
  • expectations held by employees and other members of a pension scheme may be legitimate matters to be taken into account by a decision-maker when considering the exercise of a non-fiduciary discretionary power under a pension scheme, or as an employer with a general discretionary power under the contract of employment. These expectations are relevant when considering whether the decision-maker has acted perversely or irrationally;
  • the existence of member expectations is only one of a range of relevant factors to be taken into account, and should not be given ‘paramount significance’. For example, an employer may legally be able to make detrimental changes to benefits in breach of members’ expectations if there have been significant changes in its financial and economic circumstances (including its trading and competitiveness) since the expectations were created.
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Common member complaints