Local Government Pension Scheme Appeal Determination By The Secretary of State

Our Ref: LGR 79/1/1631 390 INDEX

Date: July 1998

SUPERANNUATION ACT 1972

LOCAL GOVERNMENT SUPERANNUATION REGULATIONS 1986 (“the 1986 regulations”)

LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1995 (“the 1995 regulations”)

1. I am directed by the Secretary of State for the Environment, Transport and the Regions to refer to your notice of appeal submitted under regulation J5 of the 1995 regulations against the decision of the City and County of XXX (“the council”) on your benefits under the local government superannuation scheme (“the LGSS”) now the local government pension scheme (“the LGPS”)

2. The appeal has been conducted by correspondence. Consideration has been given to your letters of 28 October 1996 and 31 January 1997; the council’s letters of 18 December 1996 and 19 February 1997; ** MP’s letter of 9 November 1996; and to all copy documents enclosed with those letters.

3. The Secretary of State takes the view that the question for determination is whether you must pay interest on your repayment of returned contributions under regulation C8 of the 1974 regulations.

4. From the evidence submitted the following facts have been established:

(a) in March 1977 you were paid £792.42 by the council for your service before 8 February 1977;

(b) in November 1978 you recommenced local government employment;

(d) following an appeal, the Secretary of State determined on 31 May 1996 that the payment made to you in March 1977 was not a refund of contributions under the 1974 regulations and that your service before 8 February 1977 was reckonable;

(e) in addition to the sum of the returned contributions the council deducted interest of £3,603.91 from lump sum pension benefits that became payable for the additional reckonable service; and

(f) on 28 October 1996 you appealed to the Secretary of State against the council’s decision.

These facts have been agreed by both parties.

5. All the representations and evidence submitted have been considered. The Secretary of State is required to determine the same question as to your rights under the regulations which fell to be decided in the first instance by the council. He is acting judicially and has no power to modify the application of the regulations to the facts of the case.

6. You contend that you should not have to pay interest on repayment of the returned contributions where it was found that the council had made an error in returning your contributions.

7. The Secretary of State’s determination of 31 May 1996 allowed you to reckon service before 8 February 1977 because he determined that the payment you received in March 1977 did not constitute a return of contributions. The council contend that as the Secretary of State determined that the payment made did not constitute a return of contributions they regard it as an advance payment of benefits and applied regulation C14 of the 1986 regulations which, as far as relevant, state the following;

“C14(1) ... service for which a return of contributions has been received shall be reckonable service if the conditions in paragraph (2) are satisfied and the person makes the payment required by paragraph (3).

(2) The conditions are that -

(a) the person ceased to be employed in local government employment on or after 1st April 1974 and before 1st January 1980; and

(b) on the cessation of that employment the aggregate of his reckonable and qualifying service ... amounted to less than 5 years; and

(d) he subsequently returns to local government employment.

(3) The person must pay by not later than the relevant date to his previous fund authority for the credit of their superannuation fund -

(a) a sum equal to the contributions returned to him (together with any increase under regulation J10 and any interest he was paid); and

(b) compound interest on that sum calculated in accordance with regulation J7 for the period beginning with the date on which he received the return of contributions and ending on the date of the payment of that sum.

(4) The relevant date is the expiry of 6 months after his return to local government employment.

(5) The previous fund authority may in any particular case extend the period mentioned in paragraph (4).”

8. The Secretary of State takes the view that as the payment made in March 1977 has been deemed not to constitute a return of contributions, regulation C14(1) of the 1986 regulations does not apply. As your service prior to 8 February 1977 was to be treated as reckonable service, contributions must therefore be treated as paid under regulation D1(1)(a) of the 1974 regulations. For such a position to pertain contributions must be paid as were required at the time, that is £792.42.

9. The Secretary of State notes that there are no regulations in the LGPS/LGSS which pertain directly to the circumstances of the payment made in March 1977, since it is not to be regarded as a valid return of contributions, and he considers it must therefore be treated as a payment made in error. There are no provisions in these regulations which require interest to be paid on a return of payments made in error. He therefore takes the view that neither the council in the first instance nor he on appeal can require interest to be paid under the terms of the regulations.

10. The Secretary of State concludes that contributions applicable to your employment period prior to 8 February 1977 must be repaid in order to restore your reckonable service and that the regulations do not require interest to be paid. He determines accordingly. It is for the council to consider whether they have any other powers under which they may or are required to charge interest on a return of payments made in error, and if so to what extent it may be appropriate to use them.

11. A copy of this letter has been sent to the council.

12. Having made his determination he has no power to alter it but you may refer the matter to the Pensions Ombudsman or the High Court. Because of this, officials may not discuss the case further.

13. The Occupational Pensions Advisory Service (OPAS) is available to assist members and beneficiaries in connection with difficulties which they have failed to resolve. Their address is 11 Belgrave Road, London, SW1V 1RB (telephone number 0171 233 8080).

14. The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to the local government pension scheme. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 0171 834 9144).