Local Government Pension Scheme Appeal Determination By The Secretary of State

Our Ref: LGR 79/1/1675

December 1998

487 INDEX

SUPERANNUATION ACT 1972

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 under regulation J5 of the 1995 regulations against the decision of XXX County Council ("the council") on your local government pension scheme ("LGPS") rights.

2. The appeal has been conducted by correspondence. Consideration has been given to letters of 20 January and 17 July 1997; the council's letters of 2 April and 15 July 1997; and to all copy documents enclosed with those letters.

3. The Secretary of State takes the view that the question for determination is whether deductions should have been made in respect of your refunded contributions.

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

(a) you were employed as a care assistant by the Social Services Department of the council from 14 June 1996 until your employment ceased on 8 November 1996;

(b) on ceasing employment you received a refund of contributions;

certified amount of £37.85 and 20% tax of the gross contributions after deducting the certified amount; and

(d) on 20 January 1997 you appealed to the Secretary of State against the amount of deductions made from your refund of contributions.

These facts have been agreed by both parties.

5. The council maintain that the deductions from your refunded contributions were entirely in accordance with the 1995 regulations. In the evidence they submitted the certified amount was described as the difference between the National Insurance ("NI") contributions you have paid as a contracted out employee and those you would have paid if you had not been contracted out. The council also paid less NI contributions in this respect. They were required to pay a Contributions Equivalent Premium ("CEP') to the Department of Social Security to secure your pension rights in the additional earnings-related part of the State Scheme. The tax calculation was described as being based upon the gross contributions after deducting the certified amount.

6. 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.

7. Regulation C21 of the 1995 regulations provide for a return of a members contributions. As far as is relevant it states the following:

"C21.-(1) If a member who is entitled to count a total period of membership of less than 2 years -

(a) ceases to be employed by a LGPS employer and on so ceasing .... does not become entitled to a retirement pension ...

(b) ...

... then ... he is entitled to receive a payment under paragraph (2).

(2) A payment under this paragraph is a payment out of the appropriate pension fund of a sum equal to -

(a) the aggregate amount of the person's contributions to the fund,

(b) ...

(3) to (6) ...

(7) The administering authority shall deduct from any payment under this regulation any tax to which they may become chargeable under section 598 of the Income and Corporation Taxes Act 1988 (charge to tax on repayment of employee's contributions) ...”

8. The question whether deductions from your return of contributions for payment of your share of State Scheme CEP is not one that arises under the 1995 regulations. The matter is governed by the Social Security Pensions Act 1975. The view is taken that the Secretary of State has no jurisdiction to determine this question.

9. However the view is taken that the Secretary of State may give consideration to whether deductions may be made in respect of tax. It is clear that regulation C21(7) requires that tax is paid on a return of contributions and the Income and Corporation Taxes Act 1988 requires income tax to be deducted at the rate of 20%. It is not disputed that your gross contributions were £142.02. Assuming that the certified amount deducted of £37.85 was correct the amount to be paid in tax from the remaining sum of £104.17 (£142.02 less £37.85) appears to have been correctly calculated as £20.83.

10. The Secretary of State therefore determines as set out above and dismisses your appeal.

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

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

13. 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).