Local Government Pension Scheme Appeal Determination By The Secretary of State

Our Ref: LGR 85/18/206

31 March 2000

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 14 July 1999 in which you appeal (under regulation 102 of the 1997 regulations) on behalf of XXX Council (the council) 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’s local government pension scheme (LGPS) dispute with the council.

2. The Appointed Person revoked the council’s decision not to include Mr XXX’s gross returning officer fees as pensionable remuneration. You maintain that only the net fees, as retained by Mr XXX, are pensionable remuneration.

3. The question for decision: The question for decision by the Secretary of State is whether Mr XXX’s pensionable remuneration, in respect of his returning officer duties for borough and parish council elections, should be based on the gross fees paid by the council or the net fees retained by Mr XXX.

4. The Secretary of State has considered all the representations and evidence. Copies of documents considered have been made available to you and to Mr XXX .

5. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that only the net fees retained by Mr XXX were remuneration and can thus count as pensionable remuneration. He therefore upholds your appeal. His decision replaces that made by the Appointed Person. The Secretary of State’s reasons and the regulatory provisions which he considers apply in thiscase 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.

6. 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).

7. 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).

ANNEX TO LETTER REFERENCE LGR 85/18/206

EVIDENCE RECEIVED

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

From the council: letters (including enclosures) dated –

14 July 1999

2 August 1999

21 December 1999

24 December 1999

4 January 2000

1 February 2000

From the Appointed Person: letter with enclosures dated –

21 July 1999

From Mr XXX: letters (with enclosures) dated -

10 August 1999

12 August 1999

15 December 1999

22 December 1999

18 January 2000

REGULATIONS CONSIDERED AND REASONS FOR DECISION

Facts

2. From the evidence submitted the Secretary of State has established the following facts:

a) Mr XXX was employed by the council as Town Clerk and he was the returning officer for local council elections from 1 June 1988;

b) On 7 December 1997 his council employment ceased;

c) The council paid a returning officer’s combined fee and clerical allowance (“the gross fees”) for local elections;

d) The council paid about 50% of the gross fees to Mr XXX (“the net fees”) and he paid tax and pension contributions on them;

e) The council disbursed the remainder of the gross fees, on Mr XXX’s instructions, to other officers who assisted at elections (“the disbursed fees”);

f) Mr XXX did not pay income tax or pension contributions on the disbursed fees.

Contentions

3. The council maintain that only the net fees count as Mr XXX’s remuneration. They contend that the disbursed fees were not paid to him, and this is reinforced by the fact that he paid no tax or pension contributions on them. They accept that Mr XXX was responsible for the budget for borough and parish council election fees and expenses and therefore had the ability to direct the council to make payments to other individuals or to himself, and that he could have chosen to retain the gross fees. However, he chose not to do so. They maintain that entitlement to fees is not sufficient, and they draw a distinction between “paid” and “payable”; Mr XXX was paid only the amounts he actually received. The disbursed fees were paid to other officers as their remuneration.

4. Mr XXX maintains that his pensionable remuneration should be based on the gross fees. In his view the gross fees were paid to him for his own use. He does not consider the fact that he did not actually receive the disbursed fees means that they were not paid to him. He had total discretion over how the gross fees were to be distributed; he decided how much other officers should be paid, on the basis of a list prepared by the Chief Administrative Officer, and this varied according to the circumstances in each election. He maintains that the assisting officers were under his control and direction and were not acting as council employees. The Borough Treasurer made the payments on his direction. He does not regard income tax liability as a relevant factor in determining remuneration, and maintains it was the council’s responsibility to deduct pension contributions on the “proper” gross fees.

Regulations

5. The 1995 regulations applied when Mr XXX ceased employment. Pensionable remuneration is defined in regulation D1. Remuneration is defined in regulation C2. Payment of employee pension contributions is governed by regulation C4. In the Secretary of State’s view, the question turns on whether the disbursed fees fall within the definition of remuneration in regulation C2(1)(a), which refers to “all the salary, wages, fees and other payments paid to him for his own use in respect of his employment”.

Decision

6. The Secretary of State has first considered the arguments about income tax liability and pension contributions. He notes that while the definition of pay in the 1997 regulations specifically excludes payments on which income tax liability has not been determined, no such provision is included in Regulation C2 of the 1995 regulations. He takes the view, therefore, that under the 1995 regulations liability to income tax was not determinative of whether the disbursed fees were remuneration. He accepts that regulation C4 requires pension contributions to be paid on remuneration. He takes the view that a decision whether a payment is remuneration determines whether contributions are due, not the other way round. Thus the non-payment of contributions on the disbursed fees does not of itself mean that they did not constitute remuneration.

7. Mr XXX was the returning officer for borough and parish council elections. The gross fees were paid in respect of those elections. Whether the disbursed fees constituted remuneration depends, in the Secretary of State’s view, on whether they were paid to Mr XXX for his own use. Mr XXX contends that they were, because he had total control over the ultimate destiny of the gross fees. They council contend that they were not “paid to him”. The Secretary of State notes that other officers assisted with elections. The report of the Policy and Resources Committee (item 1208) dated 15/2/79 refers to “revised scale of fees and expenses for staff involved on district council election duties”. Fees for some officers – deputy returning officer, presiding officer and poll clerks – were separately identified in the document entitled “proposed revised scale of fees and expenses payable to the returning officer at elections of borough/district and parish councillors”. The Secretary of State understands that these separately identified fees are not part of the gross fees in contention. The papers make it clear that several officers, in addition to those separately identified, were involved in elections and they received payments from the gross fees.

8. The Secretary of State takes the view, from all the papers, that it was established custom and practice within the council for other officers to receive disbursements direct from the gross fees. He accepts that Mr XXX, as Returning Officer, was empowered to decide if and how much of the gross fees should be disbursed and to whom. Mr XXX had control over the fees, but in the Secretary of State’s view that does not necessarily mean that they were paid to him for his own use. The Secretary of State considers that this expression, with regard to the fees for the duties of this employment, covers payments actually received by an individual for his personal use and does not include monies which he disbursed to other people for the duties and did not actually receive. In Mr XXX’s case, the Secretary of State takes the view that there was both an expectation and a reality that disbursements were to be made to other officers. Once Mr XXX agreed how the gross fees were to be distributed, the disbursed fees were, in his view, paid to the other officers concerned for their own use. They were not paid to Mr XXX for his own use, within the meaning of regulation C2. He concludes that the disbursed fees do not constitute remuneration.