666 INDEX
SUPERANNUATION ACT 1972
LOCAL GOVERNMENT SUPERANNUATION REGULATIONS 1986 (the 1986 regulations)
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1. I refer to your letter of 18 July 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. Your dispute centres on the council’s decision to withdraw your cash in lieu of a leased car payment (“cash in lieu”) and to substitute an essential user car allowance which they treated as non-pensionable. The Appointed Person concluded it was reasonable to assume that you were aware of the change to the component elements of your pay although you may not have realised its significance; he was unable to judge whether adequate notice of the change was given, this being a matter of employment law. You maintain that the council should have continued to pay you cash in lieu and that this should have been included in your pensionable remuneration.
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. He has no powers to change employment terms and conditions. There are no provisions to award compensation where claims are made that information has not been provided or that there has been maladministration with regard to the LGPS. 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 Secretary of State takes the view that the questions you have asked him to decide are (i) whether the council should have continued to pay you cash in lieu from 31 March 1991 until 15 November 1992 and (ii) whether the substituted essential user car allowance was “remuneration” for the purposes of the 1986 regulations. The second question was not directly referred to the Appointed Person but his decision makes it clear that he regards the essential user allowance as non-pensionable.
5. The Secretary of State has considered all the representations and evidence. Copies of documents supplied by the Appointed Person were sent to you under cover of the department’s letter of 9 August 1999.
6. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds on (i) that the change from cash in lieu to an essential user allowance is a matter of your terms and conditions of employment over which he has no jurisdiction. The council were required under the regulations to notify you of any change affecting whether payments were counted as remuneration on which contributions were required. The Secretary of State acknowledges that the council may not have recognised that there was such a change as, at the time, they did not regard cash in lieu as liable to payment of contributions. The Secretary of State has no powers to order redress or award compensation even where it is shown that maladministration has taken place causing financial loss or injustice. On (ii), the Secretary of State finds that the essential user car allowance was not “remuneration” for the purposes of the 1986 regulations. The Secretary of State therefore dismisses your appeal.
7. The Secretary of State’sdecision confirms that made by the Appointed Person. His reasons and the regulatory provisions which he considers apply in yourcase 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.
8. 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).
9. The Pensions Ombudsman may investigate and determine any allegation of maladministrationcomplaint 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).
1. The following evidence has been received and taken into account:
(a) from you: letters dated 18 July and 17 August 1999 (with enclosures); and
(b) from the Appointed Person: letter dated 30 July 1999 (copied to you with the department’s letter of 9 August).
REGULATIONS CONSIDERED AND REASONS FOR DECISION
2. From the evidence submitted the following relevant points have been noted:
(a) You were employed by the council from 1975 and a member of the LGPS;
(b) on 18 April 1988 you elected to forgo benefits paid under the existing car benefits scheme and accept an addition to salary which was subject to tax and National Insurance but was stated not to form part of superannuable pay;
(c) from 1 April 1990 you were confirmed by the council as a sewage drainage engineer grade O under a new grading structure;
(d) on 1 June 1990 you elected to receive a cash option of the car benefit scheme (cash in lieu) with effect from 1 April 1990;
(e) from 1 April 1991 the council ceased paying you cash in lieu and they reverted to paying you an essential user car allowance;
(f) on 15 November 1992 you were made redundant and payment of your retirement pension commenced immediately;
(g) on 5 March 1996 the council notified you that the cash value of a leased car was pensionable remuneration and gave you the opportunity to elect to have the cash value included in your pensionable remuneration; and
(h) on 17 July the council found that you did not receive the cash option in your final year (16 November 1991 to 15 November 1992) and an election to include the cash value in your pension by choosing the previous year as the relevant period would not increase your retirement benefits.
3. You argue that you were not notified of the council’s decision on 31 March 1991 to change the terms of your car allowance to an essential user allowance, that they have not produced evidence of their decision, that such a change may have been illegal and that another council employee’s allowance was reverted to cash equivalent for his relevant period. You also allege maladministration in that you consider the change an error on the part of the council.
4. The council have argued that changes to their employees’ pay and conditions are notified to employees through changes in pay details and current versions are available for inspection centrally from their offices as required by employment law and that officers were bound by council members’ decisions.
5. The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. When you ceased employment the 1986 regulations provided for payment of your retirement benefits based on qualifying service and pensionable remuneration. Regulation E22 explained what constituted pensionable remuneration. Schedule 1 to the 1986 regulations defined remuneration as “ ... all salary, wages, fees, poundage and other payments paid or made to an employee for his own use and the money value of apartments, rations or other allowances in kind appertaining to his employment ... ”. There was also listed a number of exclusions from this definition. Among these exclusions was “ … any travelling or subsistence allowance or other moneys to be spent, or to cover expenses incurred by him, for the purposes of his employment” (exclusion (c)).
6. Before 1993 the 1986 regulations did not exclude the personal use element of a lease car from the term “allowances in kind” in the definition of remuneration. With effect from 1 January 1993, the regulations were amended specifically to exclude the money value of the provision of a motor vehicle (exclusion (g)). Those employees who had had the money value of a leased car treated as remuneration on which contributions were deducted continued to have it so treated notwithstanding the amendment, as long as they continued without a break to have a leased car provided by their employer (regulation C17). A time-limited period in which to appeal where employers were not treating the personal use value as remuneration was also included in the amendment. This period expired on 1 April 1993 - regulation N9 of the 1986 regulations. The 1986 regulations were superseded by the 1995 regulations from 2 May 1995. Regulation C2(2)(f) of the 1995 regulations excluded leased cars or any payment in lieu of one. The protection afforded by the earlier amendment was continued by provisions in schedule C2 paragraph 7.
7. Regulation N2(2)(a) of the 1986 regulations required the council to decide which of your emoluments constituted remuneration on which contributions were payable, and regulation N2(3)(b)(iii) required such a decision to be made as soon as reasonably practicable after any material change in relation to your employment. Regulation N7 required the council to send a written notification of such decisions as soon as reasonably practicable after making them.
8. The Secretary of State has considered all the representations and evidence. The history of your payments is complicated, but he believes the key points of the case can be summarised as follows. The period prior to 1 April 1990 is less than clear but it appears that, whatever the effect of your election on 18 April 1988, before 1 April 1990 you were receiving an essential user car allowance. From 1 April 1990 until 31 March 1991 you were in receipt of a cash in lieu payment. From 1 April 1991 the cash in lieu payment was withdrawn and from then until you ceased employment on 15 November 1992 you were paid an essential user car allowance. At the time you received cash in lieu the council regarded it as non-pensionable, that is, they did not deduct contributions and would not count it when calculating your pensionable remuneration. Some time after your employment ceased they concluded cash in lieu at that time was pensionable, provided the member so elected and paid contributions on it. The council regarded the essential user allowance as non-pensionable and have not changed their view about that. Your pensionable remuneration does not take account of that allowance and, being based on your final year of service, cannot include your earlier cash in lieu payment.
9. The Secretary of State notes that the form you signed on 1 June 1990 for cash in lieu clearly stated that you were bound by it for a minimum period of 12 months and that at the end of that period you would have the choice whether to continue with it or transfer to an alternative option. However, the council imposed such a transfer on you after 12 months’ payment. In the Secretary of State’s view, this was a change in your contractual terms and conditions of employment. The change and the way it was handled are issues which do not fall within his jurisdiction in deciding a pensions appeal. The Secretary of State agrees with the Appointed Person that your pay slips should have made you aware that such a change had been made. However, he believes you would not have realised there could be any significance for your pension because at the time the council treated both types of allowance as non-pensionable and deducted no contributions on either.
10. The Secretary of State takes the view that if the council had decided your cash in lieu was remuneration on which contributions should be paid, they would have been required by virtue of regulations N2 and N7 to notify you in writing of the potential effect on your pension of their decision to withdraw it and substitute a non-pensionable essential user allowance. He recognises that, at the time, they had not decided that cash in lieu was such remuneration. It was only in 1996 that they did so and took appropriate action. However, it is still not open to the Secretary of State to alter your terms and conditions of employment; nor is he able to order redress or award compensation even if were shown that maladministration had led to financial loss or injustice.
11. The Secretary of State has next considered the question whether the essential user allowance should be treated as remuneration which could count towards pension. He takes the view that such allowances are intended to be paid by an employer to cover, in the round, travel expenses incurred by the employee for the purposes of his employment. It is not disputed that your duties required you to travel and it has not been shown that the allowance was primarily intended for any other reason. He therefore takes the view that the essential user allowance was intended to cover travelling expenses incurred for the purposes of employment and that it falls within exclusion (c) of the definition of “remuneration” in the 1986 regulations. He therefore dismisses your appeal.