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Our Ref: LGR 85/18/180 30 November 1999 659 INDEX |
LOCAL GOVERNMENT PENSION APPEAL
SUPERANNUATION ACT 1972
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1995 (the 1995 regulations)
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1. I refer to your letter of 6 May 1999 in which you appeal (under regulation 102 of the 1997 regulations) to the Secretary of State for the Environment, Transport and the Regions against the decision of Mr XXX, the Appointed Person, in relation to your local government pension scheme (LGPS) dispute with XXX Council (the council).
2. The Appointed Person upheld the decision of the council that you were not entitled to a certificate of material reduction.
3. The questions for decision: The questions for decision by the Secretary of State are whether:
a) for the purposes of entitlement to a certificate of material reduction, additional scarcity payments and management efficiency payments were temporary and the loss of these payments beyond your control; and
b) a certificate of material reduction should be issued on the grounds that the salary you were awarded on taking up a new contract with the council on 1 April 1997 was frozen.
4. The Secretary of State has considered all the representations and evidence. Copies of documents supplied by the Appointed Person which you may not have seen were sent to you under cover of the Department’s letter of 15 June 1999.
5. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that on a) the payments concerned were temporary and you are not entitled to a certificate of material reduction; and on b) that there are no provisions in the 1995 regulations, which applied at the time, for a certificate to be issued were a member’s pay has been frozen. The Secretary of State therefore dismisses your appeal. His decision confirms that made by the Appointed Person.
6. The Secretary of State’s reasons and the regulatory provisions which he considers apply in your case are set out in the annex to this letter, which forms an integral part of this decision. He is acting judicially and has no power to modify the way the regulatory provisions apply to the facts of the case. Having made his decision he has no power to alter it and his officials cannot discuss the case further. The decision is binding and can only be overturned by a judgement of the High Court or the Pensions Ombudsman.
7. This completes the second stage of the internal dispute resolution procedure. The 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).
8. The Pensions Ombudsman may investigate and determine any complaint of maladministration or any 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).
1) The following evidence has been received and taken into account:
a) from you: letters dated 6 May (with enclosures), 23 June (with enclosures), 25 June, 12 August (with enclosure) and 28 September 1999 (with enclosures)
b) from the Appointed Person: letter dated 20 May 1999 (with the enclosures listed in the Department’s letter of 15 June 1999); and
c) from the council: letters dated 30 June (with enclosures), 30 July (with enclosures), 25 August and 30 September 1999 (with enclosures)
2) From the evidence submitted the following relevant points have been noted:
a) during the financial years 1990/91 to 1995/96 you received additional payments variously known as scarcity, flexible subsidy, Management Efficiency payments, Management Efficiency Bonus or recruitment and retention allowances;
b) during the financial year 1995/96 your P60 shows you received total Gross Pay of £45,825:
c) on 1 April 1996 your contract of employment changed and during the financial year 1996/97 your P60 shows you received total Gross Pay of £38,577; and
d) for the financial year 1997/98 your P60 shows you received total Gross Pay of £38,668.
3) In your application to the Appointed Person you explain that following the last restructuring you were £400 per month net worse off. One factor for this is “red circling” which you explain is due to go to Tribunal in 1999. You consider you have been treated differently from other staff. Your disagreement to the Appointed Person was that the council would not issue a certificate of reduction in remuneration. You explain the reason for this was because the council considered that the reduction made in your pay related to a temporary increase. You point out that you paid LGPS contributions on this. You refer to an earlier decision by the Secretary of State and question why you are being treated differently. You also explain that you questioned the status of the additional payments in 1991 and it was indicated that if there was no termination clause in the contract of employment an individual may legitimately claim this to be a permanent feature of their contract. You provided evidence of this in a document entitled “MANAGEMENT BOARD BRIEFING PAPER” dated April 1991. In your application to the Appointed Manager and in your appeal to the Secretary of State you raise a number of other points about why you were treated differently from other staff and in particular 1st and 2nd tier officers.
4) The Appointed Person found that the payments you received during 1990/91 until 1995/96 were management efficiency payments. He could find no evidence that they were permanent enhancements of salary.
5) The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. Whether you have been treated differently from other staff is not a matter the Secretary of State can consider. His powers on appeal are limited to whether the appropriate regulations have been correctly applied in the specific circumstances of your case. Nor has the Secretary of State considered payments which you refer to as “red circled” as you have referred these to an employment tribunal. When your contract of employment changed with effect from 1 April 1997 the 1995 regulations were in force. These regulations provided members with the right to a certificate of material reduction in certain circumstances (Schedule D1 paragraph 4). As far as may be relevant to this appeal paragraph 4(4) defines a material reduction as a reduction in remuneration while a person remains in the same post or as a result of being transferred to another post with the same employer. Paragraph 4(6) states that a reduction in remuneration is not material where it did not result from circumstances beyond the member’s control, if it was temporary, or if the reduction was due to the end of a temporary increase. On 1 April 1998 the 1997 regulations came into force. These regulations contain similar provisions for material reduction in remuneration. However, regulation 23(3)(b) of the 1997 regulations has the effect of widening the scope of material reduction to include circumstances where pay increases are restricted.
6) The Secretary of State notes that in your application to the Appointed Person you cited an earlier appeal decision and questioned why you were treated differently; you enclosed details of the case. The Appointed Person named the individual in his decision letter. The Appointed Person found that this earlier case was not directly comparable to your circumstances as there appeared to be no direct reference in the Secretary of State’s determination with regards to temporary payments. The Secretary of State takes the view that each case has to be decided on its merits in the light of its individual circumstances. Consideration of other cases may be neither appropriate nor relevant in reaching a decision because circumstances are unlikely to be identical in all material respects. Comparison with other appeals is not in itself a deciding factor. An appeal can only be considered on the relevant facts. The Secretary of State is unclear how this case came to your attention and how a copy of the decision was obtained. No evidence has been provided to indicate that the appellant gave approval to his case being considered. Moreover, public discussion of cases relating to a named individuals’ personal circumstances breaches fundamental principles of confidentiality and privacy unless it is clearly shown that it is done with the express consent of the individual concerned.
7) The Secretary of State has first had to identify in which year you suffered the reduction in remuneration which you consider to be material. It is not disputed that during the financial years 1990/91 to 1995/96 you received additional payments. Nor is it disputed that your pay from 1 April 1997 was reduced. It appears to the Secretary of State, therefore, that the reduction to which you refer is that which occurred from 1 April 1997. No representations have been made on the question whether the circumstances were beyond your control. Nor has it been suggested the reduction was temporary. The Secretary of State has therefore has to consider whether or not the earlier additional payments were temporary, in the sense intended by the 1995 regulations which applied at the time. The evidence provided refers to these payments variously as scarcity, flexible subsidy, Management Efficiency payments, Management Efficiency bonus or recruitment and retention allowances. There is documentary evidence which shows that the payments made for the financial years 1990/91, 1991/92 and 1992/93 were “Recruitment and Retention Package – Scarcity Payments”. The evidence also shows the status of these payments being made under a report entitled “Recruitment and Retention in XXX” dated 15 September 1987. It is noted that the third and final payment became effective from 1 April 1993 subject to satisfactory work performance. You acknowledge that the council’s view that these were time limited scarcity payments could be argued to be correct. As there is agreement that they finished in 1992/93 and were time limited payments (which was not disputed when they ceased) the Secretary of State has not considered this.
8) It is further noted that with effect from 15 November 1994 your received under the “Recruitment and Retention Package – Flexible Subsidies” a monthly payment which at that time was £363 per month. You were told that this was both taxable and superannuable. You were informed in a letter from XXX, Chief Executive, dated 22 May 1995, that you would retain, on a protected basis, your flexible subsidy of £363 per month. An undated “STATEMENT OF PROTECTED EARNINGS” shows the value of protected earnings as salary protection £3,144 and flexible subsidy £4,356. This statement was attached to a letter dated 14 February 1997. From the evidence received it appears that this payment is one you refer to as “red circled” and it has therefore not been considered for the reasons given above.
9) With the exception of the flexible subsidy paid from 15 November 1994 no specific documentary evidence has been provided to show what additional payments you received during the financial years 1993/94, 1994/95 and 1995/96 and the status of these payments. You provided copies of your P60 for the financial years 1995/96, 1996/97 and 1997/98 which show gross pay respectively as £45,825, £38,577.01 and £38,668.10. You consider that the 1993/94 payment was paid as a Management Efficiency Bonus. As there was little evidence to the status of any additional payments which may have been made to you for the financial years 1993/94, 1994/95 and 1995/96 the council were asked to provide copies of letters sent to you. A copy of our letter of 23 September to the council was also sent to you. In documents provided with the council’s letter of 30 September there is reference to management efficiency payments paid to 3rd tier officers. There is some evidence to suggest that if overtime was claimed this was deducted from these payments. The council say that, having looked at the matter they have now concluded that the “Scarcity Payments” were only for the years 1990/91, 1991/92 and 1992/93. Having checked with colleagues who worked in the former XXX Neighbourhood their conclusion was that the payments made for the other years were not “Scarcity Payments”. The council further explained that the Management Efficiency Bonus referred to in earlier letters in respect of 1993/94 was bought out as part of a settlement in 1995 negotiations with the Trade Unions. They have been unable to provide a copy of the letter to you but have provided a similar letter to another employee of the council (personal details have been deleted). It is noted that you have not disputed you received such a payment. This payment represented 20% of salary from 1 April 1994 to 30 June 1995.
10) The Secretary of State in reaching his decision has not been helped in that little documentary evidence has been provided explaining what additional payments were made to you for the financial year 1995/96. The Secretary of State notes that the council have on a number of occasions informed you that the payments you received during the period 1990/91 until 1995/96 were Management Efficiency payments, also referred to as scarcity payments, and were viewed as temporary. In a memorandum to you dated 12 January 1999, the Head of Financial Services, XXX, confirmed that these payments were made under reference to a report entitled “Recruitment and Retention in XXX” dated 15 September 1987 and that this report indicates that the payments were of a limited duration. The Department has tried to clarify the position about payments made to you. The Council in their letter to the Department dated 25 August 1999 confirmed that they were scarcity payments paid at 10%, 15% and 25% of the current salary for two three-year periods starting in the financial year 1990/91 and ending in the financial year 1995/96. However, the Council in their letter to the Department dated 30 September 1999 stated that the “Scarcity Payments” were for the period 1990/91 to 1992/93. They further stated that there is no documentary or other evidence to suggest that you received a Scarcity Payment or other payments with the 10%, 15% and 25% pattern. They explain in this letter that the Management Efficiency Bonus referred to in previous letters in respect of 1993/94 was bought out as part of a settlement in 1995 negotiated with the Trade Unions. It is noted this was “ ... in full and final settlement of any claims against the Council in respect of the XXX Management Efficiency Bonus”. The Secretary of State is required to decide whether as a result of a payment or payments ceasing you have suffered a material reduction in remuneration in the sense intended by the 1995 regulations and so be entitled to a certificate to this effect (Schedule D1 paragraph (4)(3)).
11) The Secretary of State notes that you have not disputed that you received a payment, of 20% of salary from 1 April 1994 to 30 June 1995, as full and final settlement of any claims against the Council in respect of the XXX Management Efficiency Bonus. Whether you paid pension contributions on this does not mean that the payment was permanent, although it may be pensionable. From the evidence available it appears that this would have been paid to you during the financial year 1995/96. The Secretary of State takes the view that such a payment was a one-off payment and therefore a temporary increase in your remuneration. It is therefore caught by the exclusion in schedule D1 paragraph 4(6). The Secretary of State therefore dismisses this part of your appeal that you are entitled to a certificate because you suffered a material reduction in remuneration.
12) The Secretary of State has next considered the question whether a certificate of material reduction should be issued on the grounds that the salary you were awarded on taking up a new contract with the council on 1 April 1997 was frozen. There are no provisions in the 1995 regulations, which applied at the time, for a certificate to be issued in such circumstances: the Secretary of State therefore dismisses this part of your appeal.