LOCAL GOVERNMENT PENSION APPEAL

SUPERANNUATION ACT 1972

LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)

1.                       I refer to your letter of 24 July 2000 in which you appeal (under regulation 102 of the 1997 regulations) on behalf of Mrs XXX to the Secretary of State for the Environment, Transport and the Regions against the decision of Mr XXX, the Appointed Person in relation to Mrs XXX’s local government pension scheme (LGPS) dispute with the XXX Council (the council).

2.                       The Appointed Person changed the council’s decision to allow you to commute a greater proportion of your pension to retirement grant compared to that permitted by the council.  However, you maintain that the calculation of retirement benefits with a sum commuted from pension to retirement grant contained in documents dated 16 and 19 July 1999 is the correct calculation of Mrs XXX’s retirement benefits.

3.                       The question for decision: the Secretary of State takes the view that the question to decide is whether Mrs XXX is entitled to a lump sum award in line with that stated by the council on 19 July 1999, in excess of Inland Revenue limits.

4.                       Secretary of State’s decision: The Secretary of State has decided that the council may not award a lump sum in excess of Inland Revenue limits.

5.                       The Secretary of State dismisses your appeal.  His decision upholds that made by the Appointed Person.

6.                       The Secretary of State’s reasons and the regulatory provisions which he considers apply in Mrs XXX’s case are set out in the annex to this letter, which forms an integral part of this decision.

7.                       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 or enter into further correspondence with you about the decision.  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 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).

9.                       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).

SECRETARY OF STATE’S POWERS

1.                  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 incorrect information has been provided 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.

2.                  The Secretary of State has considered all the representations and evidence, and has taken into account the appropriate regulations.

EVIDENCE RECEIVED

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

(a)               from you: letter dated 24 July 2000 (with enclosures); and

(b)               from the Appointed Person: list dated 31 August 2000 (with the enclosures copied to you with the Department’s letter of 11 September).

REGULATIONS CONSIDERED AND REASONS FOR DECISION

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

(a)               Mrs XXX commenced employment with the council on 24 June 1985 as a part-time employee working 19½ hours a week;

(b)               from 19 October 1989 she worked 21 hours a week;

(c)               from 4 January 1994 the council’s contractual hours of work for whole-time employees changed from 39 to 37 per week;

(d)               in July 1999 the council sent Mrs XXX estimates of her retirement benefits based on an early retirement date of 20 August 1999 and final remuneration of £9,500 with pension converted to a maximum retirement grant (lump sum) of £13,469.18;

(e)               on 9 September 1999 she elected to convert part of her pension to provide the maximum pensionable lump sum;

(f)                 on 13 September 1999 her employment was terminated on ill-health grounds;

(g)               on 23 September 1999 she received notification of retirement benefits payable with part of her pension converted to give a lump sum payment of £7,610.09 based on her final remuneration of £9,504.82;

(h)               on 10 December 1999 Mrs XXX was notified by the council that they received a transfer value for her pension rights with Britannic Assurance; and

(i)                 on 16 December 1999 she was notified of her recalculated yearly pension of £1,149.02 and lump sum of £7,898.56 based on her final remuneration of £9860.87.

5.                  You appealed to the Appointed Person against the council’s lump sum award.  You contended that based on the council’s July 1999 estimates Mrs XXX “When making her decision to retire did so on these figures”, that she “signed on 9.9.99 to commute” her pension to the maximum lump sum based on the estimate and you said the council told Mrs XXX that the reduced lump sum award was due to Inland Revenue changes but that you could not obtain confirmation of this.

6.                  The Appointed Person recalculated Mrs XXX’s entitlement.  He obtained a maximum lump sum entitlement, using Inland Revenue limits, of £8,455.36.  This was an increase on the lump sum awarded by the council.  He explained that the lump sum calculation included Mrs XXX’s first year of employment with the council.  He found that XXX Fund provided “incorrect calculations last year, in particular that provided in July which was plainly incorrect and not due to any change in Inland Revenue practice or any reason other than a genuine mistake.  However, I cannot instruct the XXX Fund to increase the maximum lump sum to that quoted in the estimate provided in July last year.  My terms of reference as the person appointed for the purpose of resolving disagreements … is to judge whether … Scheme Regulations and other applicable legislation have been correctly applied and to order corrective action where necessary”.  He was mindful that Mrs XXX believed that she would receive a greater lump sum when she retired but found that “the fact that Mrs XXX retired by reason of ill health leads me to believe that the incorrect estimate was not material to the termination of employment … retirement by reason of ill health is a matter of fact rather than choice … retirement would have had to take place whether the estimate provided was accurate or not”.

7.                  You ask the Secretary of State to reconsider the Appointed Person’s decision and for him to rule that the calculation of Mrs XXX’s pension entitlements detailed in the council’s July 1999 estimates are the correct calculation.

8.                  The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply.  When you retired early on ill-health grounds the 1997 regulations provided for retirement benefits to LGPS members.  Members retiring early on ill-health grounds received payment of benefits with enhancement in the form of a pension and retirement grant (lump sum) under regulation 27.  Where a member has continuous membership from before 17 March 1987 he is entitled to convert pension to lump sum (regulations 59) depending on restrictions contained in the Pension Schemes Act 1993 (regulation 59(5)).  The restrictions are set out in Schedule 4 to the 1997 regulations as amended.

9.                  The Secretary of State has considered all the evidence.  Like the Appointed Person he can only apply the relevant statutory provisions as they apply to Mrs XXX.  He cannot direct the council to act otherwise.  He notes that you do not show that the calculation of Mrs XXX’s lump sum entitlement by the Appointed Person is incorrect.  Although you ask the Secretary of State to rule that the council’s July 1999 estimate is correct you do not present any evidence that it is.  It appears to him, rather, that you believe that the higher lump sum initially estimated by the council should be paid because Mrs XXX made plans based on it, and was not told of the lower calculation until after she had ceased employment.  The Secretary of State notes that the council and XXX Fund admit to a mistake in initially calculating Mrs XXX’s maximum lump sum entitlement.  They explained, in papers sent to the Appointed Person, that this was due to an error in the computer programme, although they seem to have failed to explain this properly to Mrs XXX when they notified her of her lower lump sum.  Their revised calculations were reviewed and slightly amended by the Appointed Person.  You contend that, if she had known the correct calculation of her pension, Mrs XXX would have indicated that the lower calculation was unacceptable and would have sought to remain in employment.  The Secretary of State concurs with the Appointed Person’s view that this was a matter out of her control.  The decision to retire Mrs XXX early on ill-health grounds was - or certainly ought to have been - an employer’s decision made on medical grounds.  Regulation 27 of the 1997 regulations provides for a member’s retirement benefits to be paid where he ceases local government employment because he is permanently incapable of performing his duties efficiently due to ill-health.  An appeal can be made against a decision as to whether the member has met the criteria for the award of benefits under regulation 27 but not against the decision to terminate employment.  Rules governing employment rights, such as whether and why a person’s employment should be terminated, cannot be considered on appeal.

10.              The Secretary of State notes that the LGPS is a statutory scheme and it is subject to Inland Revenue requirements.  He has no power to award benefits that breach the statutory requirements in order to meet expectations raised by incorrect calculations.  You have presented no evidence from which he can conclude that the Appointed Person breached the statutory requirements.  While the council’s initial mistake in calculating the maximum lump sum award may constitute maladministration, the Secretary of State is not persuaded that Mrs XXX suffered financial loss or injustice because, given that she retired on ill-health grounds, termination of employment was inevitable.  She was not induced to retire early on the basis of the wrong calculation: she had to retire early, in any event, on ill-health grounds.  The Secretary of State recognises that Mrs XXX may have suffered disappointed expectations, distress and inconvenience, but he has no powers to award compensation.  He therefore upholds the Appointed Person’s decision and dismisses your appeal.