758 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 1 February 2000 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 Ms XXX, the Appointed Person, in relation to your local government pension scheme (LGPS) dispute with XXX (the council) about the reduction of your pension as a re-employed pensioner.
2. The Appointed Person upheld the council’s decision that your pension should be reduced for the months of June and July 1999. You contend that the annual salary rather than monthly salary should be taken into account when considering whether your pension should be reduced; that if, taking into account monthly salary is the correct interpretation of the regulations, then the council misled you, and that the council should have awaited the result of your dispute with them before reducing your pension.
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 provisions governing the LGPS have been correctly applied in the circumstances. There are no provisions to award compensation where claims are made that information has not been provided with regard to the LGPS or whether this information was misleading. 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 how the annual rate of remuneration of your new employments should be calculated for the purpose of deciding whether to abate your pension from the council.
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 21 February 2000.
6. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that the annual rate of remuneration applied to you for the purposes of regulation D15 of the 1995 regulations as a re-employed pensioner with XXX should be the sum of your remuneration over 12 months. His decision replaces that of the Appointed Person. The Secretary of State’s 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.
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 020 7233 8080).
8. The Pensions Ombudsman may investigate and determine any complaint of maladministrationor any dispute of fact or law in relation to the LGPS made or referred in accordance with the Pension Schemes Act 1993. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 020 7834 9144).
9. A copy of this letter has been sent to the Appointed Person and your pension manager.
1. The following evidence has been received and taken into account:
(a) from you: letters dated 27 January and 1 and 23 February 2000 (with enclosures);
(b) from the Appointed Person: letter dated 14 February 2000 (with enclosures copied to you with the Department’s letter of 21 February); and
(c) from the council: letter dated 27 April 2000 with enclosures (copied to you with the Department’s letter of 10 May).
REGULATIONS CONSIDERED AND REASONS FOR DECISION
2. From the evidence submitted the following relevant points have been noted:
(a) in September 1997 you ceased employment with the council and your pension was put into payment;
(b) on 12 October 1998 you became a re-employed pensioner with XXX (XXX) in a temporary post as Acting Manager of Electoral Services working variable hours with a salary of £130 a day;
(c) on 14 June 1999, whilst continuing employment with XXX, you started a new employment with the YYY with an actual (annual) salary of £7,696.5 working 18 hours a week; and
(d) on 31 July 1999 you ceased employment with YYY, whilst continuing to work for XXX.
3. You appealed to the Appointed Person against the council’s decision that you were overpaid pension in June 1999 by £797.25 and in July 1999 by £1358.42 and that recovery of overpayments should be in instalments over 8 months at £269.46 per month with effect from August 1999.
4. The Appointed Person found that the regulations were correctly applied but he said that the council should consider providing explanation to pensioners.
5. The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. When you ceased employment with the council the 1995 regulations applied to your retirement pension. On 1 April 1998 the 1997 regulations replaced the 1995 regulations for active (contributing) LGPS members. When you started working for XXX regulation 109 and 110 of the 1997 regulations applied to the question of whether a re-employed pensioner should have his pension reduced. Using their discretion under regulation 109 the council decided to continue to apply the provisions of regulation D15 and Part I of Schedule D5 of the 1995 regulations to the reduction of pension for re-employed pensioners. The intention of Part I of Schedule D5 of the 1995 regulations was to ensure that a re-employed pensioner did not receive more by way of pension and remuneration from his employment than the remuneration he was receiving before his employment ceased.
6. The Secretary of State has considered all the evidence. You do not dispute the way the council calculated the reduction of your pension at the start of your employment with XXX. Rather you argue the council has not applied the 1995 regulations correctly. You point out that the 1995 regulations refer to “annual rate of remuneration” and “within 12 months”. You believed that you would not have had your pension reduced if the annual remuneration figure when you were re-employed did not exceed “the figure” you were advised of by the council. The Secretary of State notes that on 26 September 1997 the council wrote to advise you that “the maximum rate of pay you may earn without affecting your pension is currently £18,251”. He also notes that in the council’s “Pension planning supplement” advice dated September 1998 and that in the section “Pensioners who go back to work” they explain their policy on abating pensions upon re-employment. It states that if the:
“rate of pay in the new employment plus pension exceed the rate of pay at leaving the first employment, the pension must be reduced by the excess”.
They gave examples of annual rates of remuneration at retirement, annual rate of pension and remuneration in new employment and how they would effect pension paid per annum. You say you were never told that the monthly rate would be “the trigger to abate” your pension.
7. Under Schedule D5, Part I, paragraph 5(1), the annual rate of remuneration for fixed-rate emoluments (as opposed to fees) is defined in the case of the new employment as the annual rate on the first day of employment. Therefore it is the annual rate of remuneration on the first day of your new employment which had to be taken into account, the actual amount to be earned in any one year. Paragraph 2 of Schedule D5 requires the annual rate of retirement pension to be reduced “while the person holds the new employment”. The Secretary of State notes that the council in their letter of 27 April 2000 explain their decision as follows:
“In consideration of the fact that Mr XXX worked variable hours whilst at XXX, and was paid on a claims basis, there is no annual rate of pay in this case. In order to assess whether his pension was subject to any abatement, we calculated the maximum rate he could earn at the date he commenced employment with XXX. This was compared with the amount he actually earned. A further assessment of his maximum earnings was carried out as at the date he commenced his second employment … ”
The Secretary of State has, therefore, considered whether this is correct given the circumstances of the case.
8. The 1995 regulations do not specifically explain how the “annual rate of remuneration for the new employment” is to be calculated where there is no annual rate on the first day and there are variable hours as in your case. 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 the 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 the council used the formula in Schedule D5 (indexed former salary less pension and salary receipts), to calculate the maximum salary that you could earn on monthly basis as a re-employed pensioner. The salary they used was the your actual pay for a month. They calculated your variable salary at XXX as having exceeded the maximum receipts for June and July 1999. They also included in the calculation your YYY salary for those months. The Secretary of State takes the view that where a person is employed on variable hours without a fixed annual rate of remuneration the annual rate of remuneration must be taken as the sum of the remuneration paid within a period of 12 months from the date the new employment started. It may 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 the period the sum equal to the amount payable would be aggregated to give an annual rate of remuneration. Where the aggregate pay equalled or exceeded the annual rate of pay for the former employment the person’s pension would be subject to abatement.
9. The Secretary of State notes the council’s letter to you of 7 September 1999 which indicates 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 must 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 the Local Government (Discretionary Payments) Regulations 1996.
10. With regard to your contention that the council should have regard to your financial position before reducing your pension the Secretary of State takes the view that as the council decided under regulation 109 of the 1997 to apply the abatement rule in regulation D15 of the 1995 regulations they cannot vary it in individual cases. Under the 1997 regulations they have a duty to maintain the pension fund although there is no specific provision for the council to recover overpaid benefits or the way such benefits are recovered. Furthermore, the Secretary of State takes the view that consideration of a member’s ability to pay is not provided for in the 1997 regulations and, therefore, cannot be dealt with on appeal. In such circumstances the Secretary of State does not have the power to intervene or take a view on the method or procedure to be used to recover any overpayment.
11. The Secretary of State concludes that the council should aggregate the amount earned by you over a 12 month period, under your contracts with XXX and the YYY from when you first became a re-employed pensioner with XXX, to arrive at your annual rate of remuneration for the purposes of regulation D15 of the 1995 regulations. He therefore allows your appeal.
12. from 30 November 1998 to 28 February 1999 you were paid £1,300 a month;
(a) for the month to 31 March 1999 you were paid £1,430;
(b) for the month to 30 April 1999 you were paid £1,560;
(c) for the month to 31 May 1999 you were paid £1,430;
13. The Secretary of State notes the council did not apply the reduction continuously to the whole of the period of your employment with the XXX as provided by paragraph 2 and that the regulations are not phrased to cover simultaneous new employment. Every period of re-employment must be treated in this way on the day each period begins. However, he is satisfied they properly applied the intention of regulation D15 to your case and that for the period he worked for both XXX and YYY your local government pension was reduced so that during that period he did not receive more than he was earning before retiring, subject to any increases made to his pension under the Pension (Increases) Act 1971. The phrase “within 12 months” only appears in paragraph 3 in the context of remuneration in a concurrent employment with an LGPS employer, where an LGPS member would not qualify for a pension, that may continue after a member started to receive payment of retirement pension or subsequent new employment to the concurrent employment starts within 12 months of the concurrent employment ceasing. Paragraph 3 does not provide an exception to the way abatement is applied but rather provides for circumstances where pension is not reduced. It is not argued that such circumstances apply here.
14. The Secretary of State takes the view that the council applied the abatement rule to your combined salary with XXX and YYY when you commenced new employment with YYY by reducing your pension payments for the period 14 June to 31 July 1999 as they considered your the total annual rate remuneration and pension exceeded the indexed annual rate of remuneration of your former employment. It was incidental that your monthly rate of pay was used to make the calculation. The abatement rule in the 1995 regulations in this case required the council to reduce your pension specifically for the period your aggregate remuneration and pension exceeded the indexed rate of remuneration of your former employment. The council was required to apply the 1995 regulations as they saw them unless it was determined on appeal that they should be applied otherwise.
15. With regard to your contention that the council gave misleading advice. At the time the time in question the Occupational Pension Schemes (Disclosure of Information) Regulations 1996 required that information to be made available to members of an occupational pension scheme. However, the Secretary of State has no power to order redress where it is shown that the council was in breach of such regulations even where it has lead to financial loss or injustice.