773 INDEX
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 (TRANSITIONAL PROVISIONS) REGULATIONS 1997 (the transitional provisions)
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1. I refer to your letter of 9 February 2000 in which you appeal (under regulation 102 of the 1997 regulations) on behalf of Ms 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 Ms XXX’s local government pension scheme (LGPS) dispute with XXX (the fund).
2. The Appointed Person upheld the fund’s decision that as a re-employed pensioner Ms XXX was overpaid £1,300.67 for the period of her re-employment.
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 will not under the 1997 regulations overturn a decision where the fund have exercised a discretion. His role is, rather, to ensure that the discretion has not been exercised unreasonably, 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. 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 Ms XXX’s pension should have been abated for the period of her re-employment from 4 January to the 31 March 1999.
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 6 March 2000.
6. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that the fund were incorrect to abate Ms XXX’s pension for the period of her re-employment from 4 January to the 31 March 1999 solely on the basis of that period of re-employment. His decision replaces that made by the Appointed Person. The Secretary of State’s reasons and the regulatory provisions which he considers apply in Ms XXX’s case 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 Ms XXX’s pension manager.
1. The following evidence has been received and taken into account:
(a) from you: letter dated 9 February 2000 (with enclosures); and
(b) from the Appointed Person: letter dated 21 February 2000 (with the enclosures listed in the Department’s letter of 6 March).
REGULATIONS CONSIDERED AND REASONS FOR DECISION
2. From the evidence submitted the following relevant points have been noted:
(a) on 23 October 1994 Ms XXX retired from part-time employment with XXX probation service and her pension was put into payment;
(b) her annual remuneration on ceasing employment was £10,978.56 and her retirement pension was £4,838.30;
(c) on 4 January 1999 she was re-employed part-time by XXX Service (XXX) on a temporary contract; and
(d) on 31 March 1999 the period of her contract expired; and
(e) at the end of her contract Ms XXX informed the fund of her re-employment and they decided to abate her pension and billed her for the over-payment.
3. In her original dispute submitted to the Appointed Person Ms XXX said that she did not understand why she was billed as her re-employment contract was limited and that she acted in good faith in declaring her earnings in accordance with the rules. She suggested that others earn much more without declaring.
4. The Appointed Person found that regulation 109 of the 1997 regulations required the fund to formulate a policy concerning abatement for re-employed pensioners, that they decided to continue to apply the restrictions and reductions in Schedule D5 of the 1995 regulations and that they applied these regulations correctly.
5. The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. When Ms XXX retired her benefits were payable under the provisions of the 1986 regulations. On 2 May 1995 the 1986 regulations were revoked and replaced by the 1995 regulations and from 1 April 1998 the 1997 regulations replaced the 1995 regulations for active (contributing) members and also re-employed pensioners. The 1986 and 1995 regulations contained similar requirements for LGPS administering authorities to apply an abatement formula to the pensions of re-employed pensioners. Regulation 109 of the 1997 regulations allowed administering authorities the discretion to formulate their own policy on the extent to which a pension may be abated. By virtue of the transitional provisions the abatement provisions applying to Ms XXX are those in the 1997 regulations.
6. In your appeal to the Secretary of State on behalf of Ms XXX you claim that the fund acted unreasonably in deciding to adopt the abatement provisions of the 1995 regulations as the policy under regulation 109 of the 1997 regulations. The Secretary of State notes that this contention did not form part of the original dispute submitted to the Appointed Person. He therefore takes the view that he cannot consider this part of your appeal under regulation 102. He is only able to consider whether the fund applied their abatement policy properly in her case. As their policy was to apply the 1995 provisions, the question is whether they have done so properly.
7. The 1995 regulations require a person’s pension to be abated in certain circumstances (regulation D15 and Part 1 of Schedule D5). Broadly, a person’s pension is reduced where they are re-employed by a LGPS employer and the annual rate of retirement pension and the annual rate of the new employment equals or exceeds the annual rate of remuneration of their former employment.
8. 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. The Secretary of State notes that the provision does not refer to the actual amount earned in any one year. He also notes that paragraph 2 of Schedule D5 requires the annual rate of retirement pension to be reduced “while the person holds the new employment”, and that it does not specify that this period has to last a year or more for the reduction to apply. However, the Secretary of State also notes that the regulations do not specifically explain what is to be taken as the “annual rate of remuneration” on the “first day of employment” where a person is contractually required to work less than the standard number of hours in a year, either through part-time working or under a fixed-term contract of less than 12 months. The Secretary of State has had regard to Ms XXX’s letter of appointment dated 5 January 2000. This does not refer to an “annual rate” as such, but it states that her “commencing salary will be based on £22,956 per annum”, that her “appointment is expected to last until 31 March 1999, although it may end sooner”, that her “contract is for less than three months”, and that she was “required to work 22 ½ hours per week”. The Secretary of State takes the view that it is not disputed that Ms XXX was contractually required to work part-time and for a fixed-term of less than three months, and he notes that no “annual rate”, only a full-time “annual salary”, was quoted. In such a case the Secretary of State takes the view that to determine the annual rate it is relevant to have regard to the intention of the regulations. The clear intention of 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.
9. The Secretary of State notes that Ms XXX’s remuneration for her part-time fixed-term contract was based on an annual full-time salary. Since she worked part-time and the fixed term of the contract was for less than one year, the Secretary of State takes the view that the annual salary cannot be regarded as the annual rate of remuneration since there was no potential to earn such a sum under the terms of the contract. The Secretary of State notes that the fund seem to have recognised this principle in that they have reduced the annual salary pro rata to Ms XXX’s part-time hours to determine an annual rate. They did not, however, take the further step of reducing the sum pro rata to the length of Ms XXX’s contract. In the case of such a fixed-term contract, the contracted remuneration will be an amount of money paid for the duration of the contract, although this amount may, as with part-time employment and in Ms XXX’s case, be derived from an annual salary figure for full-time equivalent work. The Secretary of State recognises that there may be more than one, or a succession of, fixed term contracts during the course of a year. The Secretary of State takes the view that where a person is employed on a fixed-rate contract or contracts of less than 12 months the annual rate of remuneration is the sum of the contractual remuneration paid within a period of 12 months from the date the new employment started. It may therefore 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 that period the sum equal to the amount payable under each contract would be aggregated to give an annual rate of remuneration. Where the aggregated pay equaled or exceeded the annual rate of pay for the former employment the person’s pension would be subject to abatement.
10. The Secretary of State concludes that the fund should not have abated Ms XXX’s pension at the end of one part-time fixed term contract of less than three months.