823      INDEX

Our Ref: LGR85/18/331

 

7 December 2000

 

LOCAL GOVERNMENT PENSION SCHEME APPEAL

 

SUPERANNUATION ACT 1972

LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)

 

1)      I refer to your letter of 6 August 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 for XXX (the council), in relation to your Local Government Pension Scheme (LGPS) dispute with the council.

 

2)      The disagreement you referred to the Appointed Person concerned the reduction in your LGPS pension following the decision by the council that the payment to you of the Long Service Award was unlawful; the payment could not therefore be included in your final pay (pensionable pay) which was used to calculate your LGPS benefits.  As a consequence your annual pension has been reduced.

 

3)      The question for decision: The question for decision by the Secretary of State is whether the Long Service Award payment can be included in your pensionable remuneration which is used to calculate your LGPS benefits.

 

4)      Secretary of State’s decision: The Secretary of State has decided that the Long Service Award is not part of your pensionable remuneration used to calculate your LGPS benefits.  The following paragraphs explain why.

 

5)      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 statutory provisions governing the LGPS have been properly implemented. The Secretary of State has no powers on appeal to consider the lawfulness of payments, other than those which constitute a benefit payable under the LGPS regulations, made to members of the LGPS.  A Long Service Award could not itself be a LGPS benefit.  

 

6)      The Appointed Person found that the Long Service Award made to you by the council “… should not therefore have been made and consequently should not have been included within the final pay figure used to determined retirement benefits… from the Local Government Pension Scheme. I therefore believe the Council was correct in its decision to cease pension payments derived from the payment of the Long Service Award.”.  He further found that “the Council still has a case to answer in terms of making these payments in the first place.  The inclusion of the Long Service Award to calculate pension benefits, in my view, represents maladministration on the part of the Council.”.

 

7)      The Secretary of State is aware that the council applied for sanction under section 17 and 18 of the Audit Commission Act 1988.  This shows that the council considered the payments to be open to challenge by the District Auditor on the grounds that the expenditure was unlawful.  The Secretary of State’s response made it clear that in his view authorities have never had the power to defer payment of a Long Service Award so as to enhance final pensionable remuneration, with the intended purpose of increasing a pension calculated by reference to that remuneration.  The authority’s actions in doing so can therefore be seen as unlawful.  The Secretary of State is aware that subsequently the council clearly stated in their letter of 8 May 2000 their conclusion that they considered all payments were unlawful because “the payment of the Long Service Award was to reward past service. The purpose of which was to enhance pensionable pay in their last year of service for the sole purpose of boosting pensions.”.

 

8)      The Secretary of State has noted the council’s comments on the purpose of the payment of the Long Service Award and their consequent decision that all payments were unlawful.  Where the payment is unlawful it cannot be regarded lawfully as remuneration on which your LGPS benefits are calculated.  It is clear to the Secretary of State that the council should not have made unlawful payments in the first place.  Therefore, the council’s action in respect of the payment of a Long Service Award in order to boost your pension, and the subsequent decision to withdraw it and reduce your pension, may well amount to maladministration in relation to your pension.  However, even where maladministration has led to financial or injustice the Secretary of State has no powers to award compensation.

 

9)      The Secretary of State’s decision confirms the effect of the Appointed Person’s decision.  He is acting judicially and has no power to modify the way the regulations 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.

 

10)  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 0207 233 8080).

 

11)  The Pensions Ombudsman may investigate and determine any allegation of maladministration or any complaint or 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 0207 834 9144).