LOCAL GOVERNMENT PENSION APPEAL

SUPERANNUATION ACT 1972

LOCAL GOVERNMENT SUPERANNUATION 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 15 January 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 Mr XXX, the Appointed Person in relation to your local government pension scheme (LGPS) dispute with XXX Fund (the fund).

2.                  The Appointed Person upheld the fund’s view that it was the Department of Social Security (DSS) who were responsible for pension increases (inflation proofing) on the Guaranteed Minimum Pension (GMP) part of your LGPS pension once you reached state retirement age and that the fund acted in accordance with DSS legislation.  You ask the Secretary of State to clarify the rules that led to the termination of GMP pension increases paid to you from the age of 65 to 70 on your 70^th birthday.

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.  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, when you reached age 70, the fund acted correctly when they recalculated your pension benefits resulting in a reduction to you of about £10 per month.

5.                  The Secretary of State has considered all the representations and evidence.  Copies of documents supplied by the Appointed Personwere sent to you under cover of the Department’s letter of 13 March 2000.

6.                  Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations.  He finds that fund acted correctly when they recalculated the GMP element of your pension at age 70 when the incapacity allowance you were receiving from the DSS reverted to the state retirement pension.  His decision confirms that made by 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.                  For representations you may wish to make about payment of state pension please write to the Secretary of State for Social Security at the DSS, Richmond House, 79, Whitehall, London SW1A 2NS (020 7238 3000).

EVIDENCE RECEIVED

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

(a)               from you: letters dated 15 January (with enclosures) and 17 February 2000; and

(b)               from the Appointed Person: letter dated 8 March 2000 (with the enclosures copied to you with the Department’s letter of 13 March).

REGULATIONS CONSIDERED AND REASONS FOR DECISION

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

(a)               your date of birth is 17 May 1929;

(b)               on 27 May 1994 the DSS notified the fund that as you were in receipt of state incapacity benefit payments from the DSS you should not be treated as retired for the purposes of your state pension payments;

(c)               on 10 May 1999 the DSS notified the fund that as from your 70^th birthday on 17 May 1999 your incapacity benefit would revert to the state retirement pension;

(d)               from 17 May 1999 the fund treated you as commencing your retirement for the purposes of the payment of your state retirement pension, this led to the recalculation of the pension increases on the GMP element of your LGPS pension paid by the fund from the age of 65 to 70;

(e)               although the new rate of pension applied from 17 May 1999 the fund did not implement the change of payment until 1 July 1999, so an overpayment did not occur; and

(f)                 the Benefits Agency of the DSS subsequently confirmed by fax dated 20 September 1999 that the fund had correctly adjusted your pension.

3.                  You appealed to the Appointed Person because you did not understand the fund’s explanation for the reduction of your pension which amounted to £10 per month.  The Appointed Person found that the fund had properly calculated your pension and he explained the reason why your pension was reduced.

4.                  You are not content with the Appointed Person’s decision and have asked the Secretary of State to interpret the rule that caused your pension to be reduced.  You feel the rules (section 59 of the Social Security Pensions Act 1975) also needs to be clarified in this respect.

5.                  The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply.  As an occupational pension scheme contracted out of the State Earnings Related Pension Scheme (SERPS) the LGPS is required to provide pension benefits to employees on retirement which is at least equal to what they would receive under SERPS. This is known as the guaranteed minimum pension (GMP) and is included as part of the pension paid by the LGPS pension fund.  This commitment is currently contained in regulation 36 of the 1997 regulations (prior to 1 April 1998 this was contained in regulation D17 of the 1995 regulations and before 2 May 1995, regulation E1 of the 1986 regulations). The normal retirement age in the LGPS is age 65.  Employees who cease to hold their local government employment at this age become entitled to the immediate payment of their retirement benefits.  A man also becomes entitled to the payment of his state retirement pension.

6.                  The payment of the state retirement pension triggers the payment of the GMP.  LGPS retirement benefits and state retirement benefits, including the GMP, are uprated annually (Pensions Increase) in line with the retail prices index in accordance with regulation 91 of the 1997 regulations and the Pensions Increase Act 1971.  The pension fund has responsibility for paying pensions increase on the difference between your total pension with them and the GMP element.  The DSS has responsibility for paying pensions increase on the GMP element of the pension following retirement.  Where the additional pension paid by the DSS exceeds the GMP element of the LGPS pension the GMP element is deducted from the LGPS, or public service pension.  This is to prevent double pension increase on the GMP.

 

7.                  The pension fund were notified on 27 May 1994 that as you were a person who was in receipt of an incapacity allowance when you retired at age 65 on 17 May 1994 you were treated, for DSS purposes, as though you were still in employment.  The effect of this was that the pensions increase you became entitled to on your LGPS pension was calculated in a different way.  In other words the GMP element of your pension was not deducted from your LGPS pension before the pensions increase was applied and so the whole of your retirement pension, including the GMP element was paid by the pension fund.  The incapacity benefit you received from the DSS also included an amount equivalent to the GMP pensions increase.  This resulted in an advantage to you, which is called “double inflation proofing” and is specifically allowed under DSS rules.  This remained the position until 17 May 1999 when you reached age 70 and the DSS notified the pension fund that the incapacity allowance you were receiving had reverted to the state retirement pension.  The consequence of this was that from 17 May 1999 it was necessary for the fund to deduct the GMP from your total LGPS pension before calculating the pensions increase due.  As a person who then came to be treated as retired for the purposes of DSS legislation the DSS paid the pensions increase due on the GMP.  On 20 September 1999 the Benefits Agency confirmed this position to the fund by fax.  The revised pension payable to you commenced from 1 July 1999.  In your case the Secretary of State understands the recalculation has resulted in a reduction of approximately £10.00 per month to your pension benefit.  Neither the fund, the Appointed Person or the Secretary of State on appeal has authority to act other than in accordance with the statutory requirements of this legislation, even where this results in a reduction to a person in the pension benefits payable.

8.                  The Secretary of State determines as above and dismisses your appeal.