Local Government Pension Scheme Appeal Determination By The Secretary of State

Date:September 1998

Our Ref: LGR 79/1/1685

427 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 submitted on behalf of Mr XXX under regulation J5 of the 1995 regulations against the decision of the Borough of XXX (“the council”) on his local government pension scheme (“the LGPS”).

2. The appeal has been conducted by correspondence. Consideration has been given to the appeal form dated 27 March 1997; your letter of 27 June 1997; the council’s letters of 22 May and 4 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 the annual car allowance paid to Mr XXX met the definition of remuneration in the 1995 regulations.

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

(a) Mr XXX was a pensionable local government employee from 27 November 1967 until his redundancy on 25 November 1996;

(b) on 28 October 1992 he took up a Senior Health Environmental Officer post with the council for which he received an “essential car allowance”; and

(c) on 27 March 1997 you appealed to the Secretary of State against the council’s decision not to include the car allowance as part of his pensionable remuneration.

5. You maintain that Mr XXX’s car allowance should qualify as pensionable remuneration because it was money paid to him for his own use and not reimbursement of expenses. Your argument is based on the council’s mileage rate for the car allowance being fixed and more than the actual mileage covered for work. You point out that the actual mileage was less than the council’s rate. You do not accept the council’s contention that the allowance paid was set by the National Joint Council for Local Government Authorities (“NJC”) as those rates are variable. Furthermore, you consider the payment was part of a salary level settlement.

6. The council contends that the car allowance was based on NJC rates and as such excluded from the definition of remuneration in the 1995 regulations. They also contend that the allowance was paid for use of a car on council business. It was not paid as part of Mr XXX’s remuneration and deductions were not made for National Insurance from the allowance.

7. All the representations and evidence submitted have been considered. The Secretary of State is required to determine the same question as to Mr XXX’s 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.

8. When Mr XXX was made redundant the 1995 regulations defined remuneration, as far as material to the appeal, as follows:

“C2.-(1) Subject to paragraphs (2) and (3) and Schedule C5 (limitations on contributions and benefits), in these regulations “remuneration”, in relation to an employee, means the total of all the salary, wages, fees and other payments paid to him for his own use in respect of his employment, and any other payment or benefit specified in his contract of employment as being a pensionable emolument.

(2) “Remuneration” does not include-

(a) ...

(b) any travelling or subsistence allowance or any other allowance paid to an employee in respect of expenses incurred in relation to the employment;

(f) ... the money value to the employee of the provision of a motor vehicle or any payment accepted by him in lieu of such provision; or

(g) and (h) ... ”.

9. Mr XXX was paid a car allowance under a payment scheme but was not provided with a leased car and so it is not necessary to consider the question of an allowance in kind where it may be excluded from the definition of remuneration by regulation C2(1)(f). The pensionable status of the monies received must be considered. The Secretary of State takes the view that what has to be determined is whether the exclusion from the definition of remuneration of “any travelling or subsistence allowance or other moneys to be spent, or to cover expenses incurred by him, for the purposes of his employment” (“exclusion (b)”) applies to the car allowance during the relevant period, that is the last twelve months of employment, for the purpose of calculating the pensionable remuneration on which pension benefits are based.

10. The Secretary of State notes that the allowance is described as, “An Essential Users Allowance” by the council in their appointment letter to Mr XXX of 24 November 1992. He therefore takes the view that it was essential to duties of a Senior Health Environmental Officer. You have not disputed that he was so required to use his car; indeed, you accept that he did so to the extent of some 500 miles a year. The Secretary of State further notes from the appointment letter that the allowance was related to the size of the car (“according to the c.c. level of your vehicle”) and was subject to a mileage level (up to 3,525 miles per annum). It would further appear that no other form of reimbursement for the use of his car on council business was made to Mr XXX. In the Secretary of State’s view all these factors indicate that the purpose of the allowance was to defray the travel costs that would necessarily be incurred in carrying out the duties of the post.

11. Regulation C2 does not state that the travelling allowance in exclusion (b) has to be determined, calculated or paid in any particular manner to fall within the terms of the exclusion. In Mr XXX’s case it is accepted that the allowance was not calculated by reference to the actual miles travelled in any period, except to the extent that there was an upper limit. In the Secretary of State’s view this does not alter the purpose of the allowance. The Secretary of State concludes that the payment was a travel allowance to cover expenses incurred in relation to Mr XXX’s employment and that it thus fell within exclusion (b) of the definition of remuneration.

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

13. Having made his determination he 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 case further.

14. 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).

15. The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to the LGPS made or referred in accordance with the Pensions Schemes Act 1993. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 0171 834 9144).