649 INDEX
LOCAL GOVERNMENT PENSION SCHEME APPEAL
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 14 June 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 Miss XXX, the Appointed Person, in relation to your local government pension scheme (LGPS) dispute with XXX Council (the council).
2) The Appointed Person found that your pension should be abated on the basis of a calculation under paragraph 5(1)(i) of Part 1 of Schedule D5 of the 1995 regulations as at the first date of employment in each case. She further found that any pension payable as a result of the award of compensatory added years needs to be looked at separately and is not subject to appeal to the Secretary of State.
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 the statutory provisions governing the LGPS have been correctly applied in the circumstances. The Secretary of State has no powers to direct the council to act outside the provisions of the regulations. The disagreement you referred to the Appointed Person was whether the council were right in applying a monthly cap on earnings based on the 1997 regulations rather than the annual rate they had previously advised you of based on the 1995 regulations.
5) The Secretary of State has considered all the representations and evidence. Copies of documents supplied by the Appointed Person have been sent to you under cover of the Department’s letter of 13 July 1999.
6) The Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that the 1995 regulations apply and that the annual rate of remuneration in your new employment should be taken as the sum of your contractual remuneration over 12 months. His reasons and the regulatory provisions which apply are set out in the annex to this letter, which forms an integral part of the decision, the Secretary of State therefore upholds your appeal in part and his decision replaces that of the Appointed Person. 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).
9) A copy of this letter has been sent to the Appointed Person and the council’s Pension Manager.
1) The following evidence has been received and taken into account:
a) from you: letters dated 14 June 1999 (with enclosures) and 25 July 1999; and
b) from the Appointed Person: letter dated 30 June 1999 (with the enclosures listed in the Department’s letter of 13 July 1999).
2) From the evidence submitted the following relevant points have been noted:
a) on 30 September 1996 you ceased employment with the council and your pension was paid immediately;
b) your annual salary when you ceased was £33,1680 and your annual pension was £12,963.82;
c) on 22 July 1998 you commenced a fixed-term employment with XXX County Council (the county) which ceased on 16 October 1998;
d) the county in their letter to you of 10 August 1998 show commencing salary as £32,376 per annum;
e) you re-joined the LGPS on 22 July 1998;
f) a second fixed term contract with the county commenced on 17 October 1999 to 31 March 1999; and
g) the council proposed to abate your pension.
3) You contend that you were inadequately and inappropriately advised by the council in respect of future earnings and that the council’s action to abate your pension retrospectively, on a monthly basis, is contrary to the minutes of the Personnel and Finance Sub-committee which refers to the annual sum being greater than the previous salary. You also consider this is contrary to the UKSC Bulletin 95/96 and to Schedule D5 of the 1995 regulations.
4) The Appointed Person found that “... your pension should be abated on the basis of a calculation under paragraph 5(1)... (i) of Part 1 of Schedule D5 as at the first date of employment in each case ...”. In reaching her decision she took into account “ the two most recent cases applying to the application of Regulation D5 of the 1995 Regulations ...”.
5) The Secretary of State notes that reference has been made to the decisions of two other appeals and that the Appointed Person maintains that she has based her decision on one of these decisions. The Secretary of State emphasises that each case must be considered on its merits in the light of its individual circumstances; consideration of other cases may be inappropriate and not relevant in reaching a decision since circumstances are unlikely to be identical in each case.
6) The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. At the time you ceased employment with the council the 1995 regulations applied and your benefits from the council are payable under these regulations. From 1 April 1998 the 1997 regulations came into force. It is noted that you re-joined the LGPS when your first fixed term contract with the council started on 22 July 1998. The Secretary of State has first had to consider whether the 1995 or the 1997 regulations apply in your case. He takes the view that the provisions concerning abatement under the 1997 regulations apply only where a benefit has been paid under them and a new employment has been entered (regulation 110). In your case the benefits from your council employment are payable under the 1995 regulations and, in the Secretary of State’s view, the abatement provisions of the 1995 regulations apply where a new employment is entered into, even though this was after 1 April 1998.
7) The 1995 regulations require a person’s pension to be abated in certain circumstances (regulation D15 and Part 1 of Schedule D5). Broadly, a person’s pension is reduced where they are re-employed by a LGPS employer and the annual rate of the retirement pension and the annual rate of the new employment equals or exceeds the annual rate of remuneration of their former employment.
8) The Secretary of State notes that the Appointed Person determined that the annual rate of remuneration of the new employment is the amount that would have been paid had each fixed-term contract lasted for 12 months. He has, therefore, had to consider whether this is correct given the circumstances of the case. It is noted that your first fixed-term contract was for the period 22 July 1998 to 16 October 1998. A second contract was for the period 17 October 1998 to 31 March 1999. It appears from the evidence submitted that a third contract started on 1 April 1999.
9) Schedule D5 defines the “annual rate of remuneration for the new employment”. In the case of fixed rate emoluments it is the annual rate on the first day of employment, or in the case of fees it is a rate agreed by the person and the employer or by the Secretary of State in default. However, the 1995 regulations do not specifically explain how the “annual rate of remuneration for the new employment” is to be calculated where there is a fixed-term contract for less than 12 months or a succession of such contracts. The Secretary of State takes the view that in such a case it is relevant to have regard to the intention of the regulations. The clear intention of regulation D15 and Schedule D5 is to ensure that a re-employed pensioner does not receive more by way of pension and remuneration from his new employment than the remuneration he was receiving before his former employment ceased. The Secretary of State notes that your remuneration for your first fixed term contract was calculated by reference to an annual salary. Since the fixed term of the contract was for less than one year, the Secretary of State takes the view that the annual salary cannot be regarded as the annual rate of remuneration since such a sum cannot be earned under the terms of the contract’s fixed term. In such a case, the actual or contracted remuneration will be an amount of money paid for the duration of the contract, although this amount may, as it appears in your case, be derived from an annual salary figure for equivalent work. The Secretary of State takes the view that where a person is employed on a fixed-term contract or contracts of less than 12 months the annual rate of remuneration is the sum of the contracted remuneration paid within a period of 12 months from the date the new employment started. It may therefore only be possible to calculate whether a person’s pension is subject to abatement at the end of the 12 month period. At the end of that period the sum equal to the amount payable under each contract would be aggregated to give an annual rate of remuneration. Where the aggregated pay equalled or exceeded the annual rate of pay for the former employment the person’s pension would be subject to abatement.
10) It is noted that you are in receipt of annual payments in respect of a credited period (commonly known as compensatory added years). Such awards may be subject to abatement but the council have to look at this separately since they are not awarded under the LGPS. Like the Appointed Person the Secretary of State does not have powers to consider disagreements arising under either the Local Government (Compensation for Early Retirement) Regulations 1982 or the Local Government (Discretionary Payments) Regulations 1996.