Local Government Pension Scheme Appeal Determination By The Secretary of State

Our Ref: LGR 79/1/1693

Date: 18 SEPTEMBER 1998

SUPERANNUATION ACT 1972

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

LOCAL GOVERNMENT SUPERANNUATION REGULATIONS 1974 (“the 1974 regulations”)

LOCAL GOVERNMENT SUPERANNUATION (BENEFITS) REGULATIONS 1954(“the benefits 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 on behalf of Mr XXX under regulation J5 of the 1995 regulations against the decision of the XXX Fund ("the pension fund") about his local government pension.

2. The appeal has been conducted by correspondence. Consideration has been given to your appeal form dated 26 March 1997, and to your letters of 26 February and 5 June 1998; to the pension fund’s letters of 8 August 1997 and 9 January 1998; to Mr XXX’s letter of 20 November 1996; and to all the copy correspondence enclosed with those letters.

3. The question for determination is whether the lump sum element of the additional reckonable service purchased by Mr XXX under regulation D10 of the 1974 regulations should be reduced to 1/80th.

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

(a) Mr XXX is aged 54;

(b) he was a student on a full-time five year Architecture course at *** School of Architecture until 1968 and thereafter a postgraduate student at *** School of Town and Planning until 1970;

(c) Mr XXX was employed by a number of local authorities from 7 April 1970 until his retirement from *** Metropolitan Borough Council on 30 September 1996;

(d) he elected to purchase added years whilst employed by XX XXX and XXX Development Corporation ([THE CORPORATION]);

(e) on retirement Mr XXX’s lump sum was reduced in respect of his pre-1972 service along with the lump sum attributed to the additional service purchased;

(f) on 26 March 1997 you appealed to the Secretary of State against the pension fund’s decision to reduce to 1/80th the lump sum of the additional service purchased.

5. Mr XXX maintains that he was aware that his pre-1972 lump sum would be reduced to 1/80th, however, he contends he was never informed that the lump sum of the additional service purchased would also incur the same reduction. You contend that the pension fund have misinterpreted regulation E3 (7) of the 1986 regulations. Mr XXX also states he elected to purchase added years in 1975. However, since it is clear the election was made during a period of employment with [THE CORPORATION], then such an election must have been made between 19 March 1973 and 13 August 1974.

6. The pension fund maintain that they do not know the actual date Mr XXX applied for D10 added years, as the application was made to [THE CORPORATION]. They note he states that it was never mentioned to him that the additional service purchased would not attract a 3/80th lump sum, however, they comment “... I do not know what information he was given by [the] Development Corporation in this respect but I do know that Mr XXX was aware that his lump sum was paid at the lower 1/80th rate in respect of his pre 1972 local government service. As his D10 added years related to a period prior to 1 April 1972, I feel that it is not unreasonable for him to have assumed that those years would be similarly treated.”

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 pension fund. He is acting judicially and has no power to modify the application of the regulations to the facts of the case.

8. It is not disputed that Mr XXX elected to make payment in order to reckon an additional period of service under regulation D10 of the 1974 regulations, nor is the amount of the service purchased an issue, however, what is in dispute is whether the lump sum of additional service purchased should have been reduced. Where regulation E3(5)(a) of the 1986 regulations applies, it provides that for the purposes of calculating a person’s retiring allowance, the additional period of reckonable service falls to be treated as reckonable service ending on the day before he first became a contributory employee in local government employment, in Mr XXX’s case 6 April 1970. Consideration is therefore to be given to whether, this regulation does apply to Mr XXX.

9. Regulation E3 of the 1986 regulations states, as far as is material, as follows:

“E3.-(3) ...the amount of a person's retirement pension is three eightieths of his pensionable remuneration multiplied by the length in years of his reckonable service...

E3.-(4) Where but for the revocation of the 1974 regulations regulation E3(4) of those regulations (preservation of certain rights under former regulations to increased retiring allowance) would have applied to a person on ceasing to hold a local government employment, the amount calculated in accordance with paragraph (3) is increased by the amount by which it would have been increased if that regulation had applied.

(5) For the purposes of paragraph (4) -

(a) an additional period which a person has become entitled to reckon as reckonable service by virtue of, or of payments commenced under, regulation D10 of the 1974 regulations shall be treated as reckonable service ending immediately before the date on which he first became a contributory employee...

(b) ...”

Regulation E3(4) of the 1974 regulations states, as far as material, as follows:

“E3(4) The amount...of the retiring allowance to be paid to an employee who, if the former regulations had not been revoked by these regulations and he had become entitled under regulation 6 of the Benefits regulations to a lump sum grant, would have been entitled under regulation 14 of the Benefits regulations...to an increase of the amount of the grant, shall be increased by the amount ascertained by multiplying ½% of the amount of the retiring allowance, calculated as aforesaid, by the length in years of his reckonable service ending with the relevant date.”.

10. The view is taken that regulation E3(5)(a) is limited in its application; it applies “for the purposes of paragraph (4) [of the 1986 regulations]”. This paragraph, in turn, applies where regulation E3(4) of the 1974 regulations would have continued to apply had those regulations not been revoked; and this regulation, in turn, applies where regulation 14 of the benefits regulations would have continued to apply if those regulations had not been revoked. Regulation 14 commences as follows:

“14. The amount, calculated in accordance with regulation 6 of these regulations, of the retirement grant payable to an employee who-

(a) being qualified to exercise any right conferred by regulation 17 of these regulations, has not exercised it...”.

Regulation 17 of the benefits regulations is itself a provision which preserves rights to benefits under the 1937 Act existing at the time of the coming into operation of the benefits regulations. It states, as far as is material, as follows:

“17.-(1)......

(a) a person who, being immediately before the coming into operation of these regulations employed in an employment in which he was a contributory employee, within six months thereafter notifies the employing authority in writing that he does not wish to avail himself of the benefits provided under these regulations;

(b) a person who, having before the coming into operation of these regulations ceased to hold an employment in which he was a contributory employee, and having immediately after so ceasing become engaged in national service...

(c) a person who, having been employed in employment in which he was a contributory employee...without having had a disqualifying break in service...shall be entitled to enjoy rights to benefits corresponding to those previously enjoyed by him.....

.-(2) A person who immediately before the coming into operation of these regulations was subject to the provisions of a local Act...

.-(3) .....”.

In the above regulation, “contributory employee” and local Act” have definitions which relate to local government superannuable employment alone. It is not disputed that Mr XXX was not in such employment before 1970 and was not therefore able to exercise any option conferred by regulation 17 to preserve rights to receive benefits in accordance with the terms of the 1937 Act. Thus, in turn, regulation 14 of the benefits regulations, regulation E3(4) of the 1974 regulations, and regulations E3(4) and E3(5)(a) of the 1986 regulations, have no application in Mr XXX’s case. The view is therefore taken that the pension fund cannot rely upon regulation E3(5)(a) to support their contention that the additional service purchased by Mr XXX can be placed in time prior to 1 April 1972.

11. Consideration has next to be given to the application of the provisions for a contingent widow’s pension. Regulation E3(7) of the 1986 regulations states, as far as is material, as follows:

“E3(7) ... where the person is a married man and a widow's pension may become payable under regulation E5 the amount calculated in accordance with paragraphs (3) to (6) is reduced by two eightieths of his pensionable remuneration multiplied by the length in years of any reckonable service before 1st April 1972.”

12. It is not disputed that Mr XXX is a married man in respect of whom a widow’s pension may become payable under regulation E5. His retiring allowance has been calculated in accordance with paragraphs (3) to (6). Both conditions in regulation E3(7) are met, and this regulation therefore applies to the calculation of his retiring allowance. However, as described above the view is taken that the service purchased by his additional contributions does not fall to be treated as service from before 1970 for the purposes of regulation E3(5)(a) of the 1986 regulations. Moreover, the regulations which apply in Mr XXX’s case make no specific reference as to whether added years purchased under regulation D10 are to be treated as reckonable service either before or after 1 April 1972 for the purposes of regulation E3(7) of the 1986 regulations, and in light of these circumstances the view is taken that they are not attributable to the period before 1 April 1972 and should accordingly not be taken into account for the purposes of reduction under regulation E3(7).

13. The conclusion has therefore been reached that the period of added years purchased under regulation D10 of the 1974 regulations is not subject to reduction in accordance with regulation E3(7) of the 1986 regulations.

14. The Secretary of State determines as set out above and allows the appeal.

15. A copy of this letter has been sent to the pension fund.

16. 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.

17. 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.