Local Government Pension Scheme Appeal Determination By The Secretary of State

600 INDEX

Our Ref: LGR 85/18/188

9 August 1999

LOCAL GOVERNMENT PENSION APPEAL

LOCAL GOVERNMENT SUPERANNUATION ACTS 1937 TO 1953 (the 1937 to 1953 Acts)

SUPERANNUATION ACT 1972

LOCAL GOVERNMENT SUPERANNUATION SCHEME REGULATIONS 1974 (the 1974 regulations)

LOCAL GOVERNMENT SUPERANNUATION SCHEME REGULATIONS 1986 (the 1986 regulations)

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 25 May 1999 in which you appeal (under regulation 102 of the 1997 regulations) on behalf of Mr XXX to the Secretary of State for the Environment, Transport and the Regions against the decision of Mr XXX, the Appointed Person in relation to Mr XXX’slocal government pension scheme (“LGPS”) dispute with XXX County Council (“the council”) and XXX Council (“the city council”).

2. The Appointed Person upheld the decision of the council that Mr XXX is not entitled to interest on the return of contributions due to him when he ceased LGSS (now LGPS) employment with them. You maintain that the council’s refusal to pay interest is an unreasonable use of discretionary powers and that inadequate provision of information and delays and lack of openness by both the council and the city council in dealing with Mr XXX’s pension amount to maladministration.

3. The Secretary of State’s powers under regulations 102 and 103 of the 1997 regulations are to reconsider the original disagreement referred to the Appointed Person under regulation 100. This regulation refers to a matter relating to the LGPS, which effectively means whether provisions governing the LGPS have been correctly applied in the circumstances. The Secretary of State has no powers to award compensation or order redress where maladministration is alleged and shown to have taken place. Like the Appointed Person the Secretary of State has no powers to direct a local authority to act outside the provisions of the regulations.

4. The question for decision: The question for decision by the Secretary of State is whether interest must be paid on the return of contributions to Mr XXX due under the 1937 to 1953 Acts.

5. The Secretary of State has considered all the representations and evidence. Copies of documents supplied by the Appointed Person which you may have not seenwere sent to you under cover of the department’s letter of 23 June 1999.

6. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that there is no requirement to pay interest on contributions due to be returned to Mr XXX under the 1937 to 1953 Acts. His decision confirms that made by the Appointed Person. The Secretary of State’s reasons and the regulatory provisions which he considers apply in Mr XXX’s 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 disputes 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 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).

EVIDENCE RECEIVED

1. The following evidence has been received and taken into account:

a) from you: letter dated 25 May 1999 (with enclosures); and

b) from the Appointed Person: letter dated 7 June 1999 (with the enclosures listed in the department’s letter of 23 June).

REGULATIONS CONSIDERED AND REASONS FOR DECISION

2. From the evidence submitted the following relevant points have been noted:

a) from 1 September 1965 to 31 August 1967 Mr XXX was employed by the City Council as a Chief Technician at XXX College;

b) during this period he paid contributions to the LGSS;

c) immediately on ceasing employment as a Chief Technician he commenced work as a teacher with his former employer and joined the Teachers Superannuation Scheme (TSS); and

d) in August 1996 he retired from employment as a teacher.

3. Mr XXX is not satisfied with the council’s decision to offer him £65.72 against his claim for a return of contributions, with interest, due to him from when he worked for the City Council. The council do not admit they are liable. They consider the claim out of time and maintain that it is not clear from the limited records available that contributions were not returned. They do not believe they are required to pay interest.

4. In considering the appeal the Appointed Person consulted the Teachers Pension Agency and the Contributions Agency. From these he deduced that Mr XXX’s pension entitlements had not been transferred to the TSS and that on the balance of probability no refund of contributions was made to him. The Appointed Person had legal advice that there was no requirement in Mr XXX’s case for the council to make any payment concerning contributions prior to 1974. He concluded that the Pensions Regulations in force at the time did not permit interest to be paid and he found that the action of the council was reasonable and in line with the regulations.

5. The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. When Mr XXX ceased employment with the City Council provisions for the LGSS were contained in the 1937 to 1953 Acts. On ceasing local government employment he was entitled to a return of contributions unless he transferred his service to the TSS. Under Section 10(2), where an employee left due to voluntary resignation, a return of contributions did not attract payment of interest.

6. Current provisions regarding interest on a late return of contributions for pensionable service in the LGPS are contained in regulation 89(5) of the 1997 regulations (which only applies to current contributing employees) and regulation H1(1)(f) of the 1995 regulations. Regulation H1(1)(f) provides for the payment of interest where there is a late return of contributions due under regulation C8 of the 1974 regulations, regulation C12 of the 1986 regulations, or regulation C21 of the 1995 regulations.

7. Regulation J2(1) of the 1974 regulations provided that all the liabilities of a pension fund under the 1937 to 1953 Acts became liabilities of the fund set up under 1974 regulations.

8. The Secretary of State has considered all the evidence. He has first considered whether the appeal was out of time. Under regulation 100(8) of the 1997 regulations an application to appeal must be made within 6 months of the relevant date or longer if the Appointed Person considers this reasonable. The Secretary of State takes the view that the relevant event in this case was when Mr XXX ceased LGSS employment, insofar as that was when a decision had to be made in respect of Mr XXX’s contributions. The Secretary of State is surprised that Mr XXX did not pursue any question of what happened to his LGSS contributions at that time. You maintain that Mr XXX was given inadequate information (you do not specify in what respect); yet there is no evidence to show that Mr XXX made any enquiries or sought any elucidation. It appears he gave the matter no thought until he retired from his employment as a teacher. The Secretary of State finds it hard to be persuaded that he pursued his claim with due diligence. However, the nub of the dispute is now about whether interest is payable rather than whether a return of contributions is due, and the Appointed Person accepted your appeal and did not dismiss it under regulation 100(8). In the circumstances the Secretary of State has also decided to consider the appeal.

9. He has therefore considered Mr XXX’s claim for a return of his LGSS contributions and whether he is entitled to interest on the late return of these contributions. He takes the view that the evidence implies that when Mr XXX ceased employment with the City Council he did so through voluntary resignation and that he was entitled to a return of contributions without interest under section 10(2) of the 1937 to 1953 Acts. He agrees with the Appointed Person’s analysis and conclusion that the evidence suggests that, on the balance of probability, no refund was made.

10. The Secretary of State takes the view that, when the 1974 regulations came into force, there was an outstanding liability on the fund in respect of Mr XXX’s contributions which were due to be returned under the 1937 to 1953 Acts. This liability passed to the fund set up under the 1974 regulations by virtue of regulation J2(1) and subsequently remained undischarged. However, the event which gave rise to this liability occurred under the 1937 to 1953 Acts. Mr XXX’s entitlement to a return of contributions thus stems from those Acts; it is not due under the 1974 or subsequent regulations, although the new fund has an inherited liability to pay it.

11. The Secretary of State notes that the council have offered to pay Mr XXX an amount equal to the sum of his contributions to the LGSS. The question whether interest is due under the regulations must be considered in the light of whether it was required under the requirements in force when the payment fell due or under any subsequent provisions relating to payments due at that time. Section 10(2) of the 1937 to 1953 Acts did not contain a power for interest to be paid either on the repaid contributions themselves or as a result of late payment. Regulation H1(1)(f) does contain a provision requiring the payment of interest on a late return of contributions but only in respect of one due under the 1974, 1986 or 1995 regulations. There is no provision requiring payment of interest on a late return of contributions due under the 1937 to 1953 Acts. Nor is there any power in the statutory requirements governing the LGPS which gives the council a discretion to pay interest. The question whether the council have exercised their discretion reasonably does not therefore arise. The Secretary of State concludes that under the provisions governing the LGPS interest is not payable on the late return of contributions due to Mr XXX.