796 INDEX
SUPERANNUATION ACT 1972
LOCAL GOVERNMENT (DISCRETIONARY PAYMENTS) REGULATIONS 1996 (the 1996 regulations)
OCCUPATIONAL PENSION SCHEME (DISCLOSURE OF INFORMATION) REGULATIONS 1996 (disclosure regulations)
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1. I refer to your letter of 8 March 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 the Internal Disputes Resolution Panel, as conveyed by Mr XXX, who were the Appointed Persons in relation to your local government pension scheme (LGPS) dispute with XXX (the council).
2. The Appointed Persons upheld the council’s decision not to award you increased membership of the LGPS on ceasing employment with them. You maintain that this was contrary to normal practice, and that were treated less favourably than others in the same department.
3. The question for decision: The Secretary of State takes the view that the question for decision is whether the council acted unreasonably or improperly in deciding not to exercise their discretion to resolve to award you an increase in LGPS membership period when you ceased employment with them.
4. Secretary of State’s decision: The Secretary of State finds that it has not been clearly shown that the council acted properly or reasonably in exercising their discretion not to increase your membership on ceasing employment. The Secretary of State has therefore decided that the council should reconsider the matter. His decision does not require the council to come to a different decision if, on a proper reconsideration and explanation of the issues, they still conclude that an award of additional membership is not justified.
5. The Secretary of State therefore allows your appeal to the extent set out in paragraph 4 above. His decision replaces 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.
6. The Secretary of State 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 independent 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 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, your pension manager and former employer.
EVIDENCE RECEIVED
1) The following evidence has been received and taken into account:
a) from you: letters dated 8 March and 18 April 2000 (with enclosures); and
b) from the Appointed Person: letters dated 17 and 30 March 2000 (with the enclosures copied to you with the Department’s letters of 21 March and 4 April 2000).
|
|
SECRETARY OF STATE’S POWERS
2) 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 Scheme, which effectively means whether the provisions governing the LGPS have been correctly applied in the circumstances. The Secretary of State will not under the 1997 regulations overturn a decision where the council have exercised a discretion. His role is, rather, to ensure that the discretion has not been exercised unreasonably or improperly and, in cases where it has, to determine that the matter should be reconsidered in a proper manner. There are no provisions to award compensation where claims are made that information has not been provided with regard to the LGPS or that maladministration has occurred even where this has led to financial loss or injustice. The Secretary of State has no powers to direct a local authority to act outside the provisions of the regulations.
3) From the evidence submitted the following relevant points have been noted:
a) your date of birth is 7 May 1947;
b) you accrued 13 years 104 days membership period in the LGPS working for XXX;
c) in 1993 when you became an employee of the council you preserved your previous membership with XXX;
d) you worked in the council’s Traffic Team which became subject to reorganisation in 1997;
e) on 26 November 1997 you requested from the council an estimate of early retirement benefits;
f) on 22 April 1998 you were sent an estimate of your retirement benefit entitlement accrued with the council;
g) on 11 May 1998 the council confirmed the deletion of your post, and identified you as a “redeployee”. As such you were advised of the options available to you: redeployment, voluntary severance, or early retirement;
h) on 12 May 1998 you advised the council that you were considering the early retirement option and asked for confirmation that you would receive 6 2/3 additional years;
i) on 13 May 1998 the council notified you that it would not be possible to agree to add the extra years to your retirement entitlement.
4) You appealed against the council’s decision. You contend that your post was deleted and that contrary to normal practice you were not awarded added years in your pension benefits, whereas colleagues who requested estimates at a later date than you, received payment of their early retirement benefits with added years. You maintain that you were discriminated against and you complain about the length of time you had to wait for your estimate. You say that you were made redundant as the result of the council’s reorganisation of the traffic business unit and that you therefore took early retirement for business not personal reasons.
5) Your appeal was referred by the council to their Internal Dispute Resolution Procedure Panel. The Panel decided that the Director of Regeneration and Environment had applied the Council’s policy correctly in respect of the calculation of your retirement benefits. They considered that added years could only be granted where a clear business case for doing so had been demonstrated. The Department who were responsible for making the decision had confirmed that in your case there were no grounds for making such a case.
6) You submitted to the Secretary of State the same contentions that you submitted to the council’s panel. However, you also contend that the council’s LGPS policy on questions of added years required them to consider “ … each case equally and fairly … ” and that this was not done in your case. You contend that the Appointed Person’s review of your appeal at stage 1 should have involved review of papers relating to the original decision on your pension and that only papers relating to the council’s general Policy and Procedures appear to have been considered.
7) The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. On 1 April 1998 the 1997 regulations come into force. Regulation 26 provides that if a member aged 50 or more retires from his local government employment and the employer certifies that this is due to his redundancy, he is entitled to immediate payment of his pension benefits. These will not be actuarially reduced. Regulation 26(4) makes it clear that “redundancy” includes retirement in the interests of efficiency.
8) Regulation 31 allows a member who leaves local government with deferred benefits to elect to receive those benefits at any time from age 50. If he is less than age 60 he can only receive them if his employer agrees. These benefits must be actuarially reduced, unless the member’s age and total scheme membership add up to at least 85 years (the 85 year rule) (there are exceptions for ill-health and compassionate grounds).
9) Regulation 52 gives employers the discretion to resolve to increase the total membership of a member, who leaves employment at or after age 50, by up to 6 2/3 years.
10) The 1997 regulations require an LGPS employer to make resolutions in respect of certain regulations and to formulate, publish and keep under review their policy on exercising the various discretions available to them including those under regulation 52.
11) Provisions in the 1996 regulations (now contained in regulations made in 2000) gave an employer the power to award credited periods to staff age 50 or more whom the employer certified as retiring through redundancy or in the interests of efficiency. These arrangements were separate from the LGPS. Calculation of an award of a credited period worked the same way as an LGPS pension calculation. A credited period does not increase membership of the LGPS; nor is the resulting compensation funded from an LGPS pension fund. Any such award is at the discretion of the employer. There is no provision for an appeal to be referred to the Secretary of State. The council state in their letter of 30 March 2000 that awards of added years are made under regulation 52 of the 1997 regulations. The Secretary of State has therefore concluded that the council’s refusal to make an award in your case is a refusal to exercise their powers under the 1997 regulations rather than those under the 1996 regulations.
12) The Secretary of State has considered all the representations and evidence. The papers do not state when you ceased employment. The Secretary of State has been informed by the council that the date was 7 March 1999. However, it is not clear to him from the papers on what grounds you ceased your employment. You have claimed you were made redundant. You have been referred to as a “redeployee”. There are also references to early retirement. The terms “redeployee” and “early retirement” do not appear in the 1997 regulations.
13) Decisions whether, when and why to terminate employment are employment decisions, not pensions ones taken under the provisions in the LGPS regulations. However, once the employment decision is taken, an employer is required to make a decision on pension entitlement which will be consequent on that employment decision. Because the term “early retirement” is not one in the 1997 regulations, the Secretary of State is unclear to what benefits you are entitled. It appears to him that you have either been made redundant (which in terms of the 1997 regulations includes efficiency retirement) or you have left for some other reason. If you have retired and the council certified that the reason for retirement was redundancy (which automatically includes efficiency), you are entitled to immediate payment of unreduced benefits. If you have left for any other reason (other than ill-health, which does not seem to apply in your case) you are entitled to deferred benefits. You could elect to have these paid immediately, subject to the council’s agreement, but they would have to be actuarially reduced (because you do not appear to satisfy the 85 year rule).
14) The Secretary of State notes, however, that the 1997 regulations do not restrict application of the power to augment membership in regulation 52 on grounds of the reason a member leaves his employment, except that it cannot be used where ill-health enhancement or a credited period under the 1996 regulations has been given. The Secretary of State has considered the council’s statement of policy on exercising their discretion under regulation 52 and their document entitled “Management of early and ill-health retirement” dated June 1998 containing policy and procedures for the management of early retirement. He takes the view that for the council to have made a reasonable and proper decision in your case it must be shown that they had regard to the policies and procedures set out in these documents, in the context of the requirements of the regulations.
15) The council’s statement of policy for regulation 52 is that:
“The council will consider each case equally and fairly on its own merits and this discretion will only be exercised where it can be demonstrated that the relevant business unit can fund the added years by a lump sum contribution and that it is in the interests of the Council to do so. The discretion may be exercised by those nominated to do so – Chief Officers and Heads of Service.”
16) The Secretary of State finds the council’s document entitled “Management of early and ill-health retirement” confusing. Paragraph 2.3 refers to the pension position for early retirement. ‘Efficiency grounds’ are treated separately from ‘Redundancy’, and appear to embrace both unreduced and actuarially reduced benefits. This does not appear to accord with the 1997 regulations. If ‘efficiency’ in the council’s document has the same meaning as in the 1997 regulations, it is included within ‘redundancy’ and if the council certify accordingly, unreduced benefits must be paid immediately. If ‘efficiency’ in the council’s document has a meaning other than that in the 1997 regulations, any benefits paid must be actuarially reduced unless the 85 year rule is satisfied.
17) The arrangements contained in this document apply retrospectively to “ … cases of early retirement not finally agreed by the appropriate Chief Officer before 10 February 1998.” He notes that in the case of staff aged 50 or over who are made redundant a business case may be made to add up to 6 2/3 years. In the case of staff aged 50 to 59 who retire early on efficiency grounds, a business case could be made to add up to 6 2/3 years where employment was terminated at the instigation of the council or where the 85 year rule was satisfied. Two proformas were attached to the document containing this guidance. One proforma was entitled “Authorisation for Early Retirement” and provided for making cases for early retirement by reason of efficiency, redundancy and ill-health. It required completion of background/rationale and a business case and the relevant Head of Service or Chief Officer was required to complete and sign the authorisation. The other proforma (FORM PF19) was a certificate of early retirement for the purposes of regulation 26 of the 1997 regulations and contained blank boxes for indicating whether there was to be an augmentation award or redundancy payment.
18) The Secretary of State concludes that in considering whether to augment service the council’s policy was to have regard to: treating each case equally and fairly on its merits; a clear business case; and the circumstances surrounding termination of employment.
19) The Secretary of State has considered the way the council exercised their discretion in your case. He notes that you were sent an early retirement estimate with the council’s memo of 22 April 1998 from XXX, Personnel Officer. This memo told you that added years would only be paid where business reasons justified the expenditure, and that this justification was “… not raised with management at your request …”. You also saw a memo dated 8 April 1998 from the Pensions Manager containing estimates for awards for added years and the council’s departmental costs. He further notes that you had meetings with the council to discuss your employment position in the context of the reorganisation of your Team and the question of added years was discussed. The council’s letter of 11 May 1998 notified you that you that you were identified as a “redeployee” and you had three options: another job with the council, voluntary severance, or early retirement. You responded that you would consider the early retirement option and you asked if you would receive 6 2/3 additional years. The council’s Planning and Traffic Services Manager informed you on 13 May 1998 that the council could not agree to add the extra years to your retirement entitlement. Following formal consideration of various matters by a Grievance Panel on 9 September 1998, the council confirmed in their letter of 2 March 1999 that no acceptable business case could be made for payment of additional years pension entitlement.
20) The Secretary of State notes that the XXX upheld your complaint that you were offered a less fair pension than your colleagues. This was on the grounds that the council failed to follow up your request for an estimate and that the resulting delay led to your early retirement being considered under new early retirement procedures introduced by the council. They found that you were not victimised but you were unintentionally discriminated against. The council’s Director of Regeneration and Environment agreed that there was an oversight in failing to follow-up your request for an estimate but stated that this did not prevent you from applying for early retirement before the council’s procedures changed. The Secretary of State finds it hard to accept this argument on the evidence provided. The council’s procedures changed (retrospectively) with effect from 10 February 1998. The Secretary of State accepts that reorganisation of the Traffic Team had clearly been underway for some time before then and that there were discussions with you on the outcome and options. However, it is not clear what transpired at these discussions, and no evidence has been submitted that you were formally notified in writing of your situation and options (including early retirement) until the council’s memo of 11 May 1998. It appears that because of the possible outcome of the reorganisation you had sought an estimate of your pension benefits in November 1997. Despite you chasing this up the council did not provide it until 22 April 1998. Under the circumstances the Secretary of State finds no evidence on which he can reasonably conclude that, realistically, your early retirement was likely to have been agreed by the council before 10 February 1998 but that you effectively delayed it beyond that date.
21) The disclosure regulations provide for certain information, such as estimates of benefits payable from normal retirement age, to be made available to members of Occupational Pension Schemes such as the LGPS on request, and within specified time limits. There is no requirement in the 1997 regulations for the council to provide estimates of benefits potentially coming into payment early. Nonetheless he notes that the council accept that the delay in giving you an estimate was due to an administration oversight. The Secretary of State accepts that this was a failure of administration by the council.
22) The Secretary of State finds that the reason given by the council for deciding not to exercise their discretion to augment your membership was that there was no acceptable business case for doing so. The council have not said how they arrived at this view. Nor have they been clear about the circumstances surrounding the termination of your employment, even though the council’s document of June 1998 shows this to be a consideration in a decision whether to consider an award of additional membership. The proformas attached to that document have not been submitted in relation to your case. Paragraph 2.3 of the document, which refers to circumstances in which augmentation may be considered, is in any case confusing and, insofar as it purports to be a statement of the LGPS requirements, misleading. Furthermore, in the particular circumstances, including the conclusions of the XXX Panel and the council’s admitted administrative failure, the Secretary of State cannot be satisfied that the council have demonstrated that they considered your case equally and fairly on its merits.
23) The Secretary of State therefore concludes that the council have not demonstrated that their decision not to exercise their discretion to augment your membership under regulation 52 of the 1997 regulations was reasonable and properly taken. He has decided that they must reconsider their decision in the light of their policy, within the context of the requirements of the regulations, so as to demonstrate they have treated your case “equally and fairly on its own merits” and with a clearly justified decision.
24) Although the Secretary of State has found some evidence of a failure of administration by the council as regards the delay in providing your estimate of benefits, he has no power on appeal to require the council to pay compensation even if maladministration were shown to have led to financial loss or injustice.