793 INDEX
LOCAL GOVERNMENT PENSION SCHEME APPEAL
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1) I refer to your application form of 26 May 2000 in which you appeal (under regulation 102 of the 1997 regulations), on behalf of Mrs M XXX, to the Secretary of State for the Environment, Transport and the Regions against the decision of Mr XXX, the Appointed Person for XXX Council (the council), in relation to Mrs XXX’s Local Government Pension Scheme (LGPS) dispute with the council.
2) The Appointed Person found that “The information provided by the respondent to the complainant was correct and the complainant relied on her own independent financial advice.”. His decision was to not uphold the complaint.
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 statutory provisions governing the LGPS have been correctly applied in the circumstances. The Secretary of State has no powers to award compensation even where it is shown that maladministration has taken place leading to financial loss or injustice.
4) The question for decision: The question for decision is whether the council misrepresented the rules governing the LGPS in relation to the period of membership the Additional Voluntary Contributions (AVCs) would buy in the LGPS.
5) Copies of all the documents supplied by the Appointed Person were sent to you under cover of the Department’s letter of 20 June 2000.
6) Secretary of State’s decision: The Secretary of State has considered all the representations and evidence, and has taken into account the appropriate regulations. He finds that there is no evidence to show that the council misrepresented the rules governing the LGPS in relation to the period of membership the AVCs would buy in the LGPS. 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.
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 0207 233 8080).
8) 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)
EVIDENCE RECEIVED
1) The following evidence has been received and taken into account:
a) from you: application form dated 26 May 2000 (with enclosures); and
b) from the Appointed Person: letter dated 15 June 2000 (with the enclosures sent to you under cover of the Department’s letter of 20 June 2000 (document list enclosed with letter)).
2) From the evidence submitted the following points have been noted:
a) on 14 March 1999 Mrs XXX elected, in writing, to make Additional Voluntary Contributions (AVCs) for the tax year 1998-1999;
b) in the election she explained that this was to be in the form of a one-off payment of approximately £770 after tax relief;
c) she further explained that as soon as the rules permit she wished “this AVC to be transferred to the LGPS to purchase “added years””.
d) The council calculated that this would buy an additional period of 179 days.
3) You do not dispute that the council, under the rules governing the LGPS, have correctly calculated the period of membership in the LGPS Mrs XXX’s accumulated value of her AVCs has bought. Rather you contend that Mrs XXX clearly stated intention was to buy a minimum of 2 years with the AVC transfer as agreed with your independent financial adviser on the rules as supplied. You believe that there has been a serious misrepresentation of the LGPS rules by the council.
4) The Appointed Person found that “ … the two methods of increasing pension benefits, Additional Voluntary Contribution and Added Years, are quite separate.”. He did not uphold the complaint because he found that “The information provided by the respondent to the complainant was correct and the complainant relied on her own independent financial advice.”. The Secretary of State notes that in your letter to Mrs Mortimer of 2 November 1999 you explain that “The cost of buying 1 year of pensionable service is 4.22 % of your pay. (This is shown on Table D of the Leaflet). The maximum contribution you can make is 10% which would buy 2 years 135 days.”.
5) The LGPS allows a member, subject to certain conditions, to elect to either pay increased contributions into the fund to buy an additional period of membership in the scheme (added years) (regulation 55) or to make AVCs (regulation 60). Where a member makes AVCs the administering authority must invest them with an approved AVC body. AVCs provide a separate pension benefit, usually at normal retirement age. However, with effect from 1 April 1998 a member, subject to meeting certain conditions, could opt to transfer the accumulated value of the AVCs fund into the LGPS (regulation 66), to acquire transfer credits in the LGPS (regulation 66(5)). Effectively transfer credits buy a period of membership in the LGPS which provide an additional annual pension.
6) The Secretary of State notes that the council wrote on 20 July 1998 to Mrs XXX providing information about making additional pension contributions to increase membership and AVCs. The letter explained that Mrs XXX could elect to pay additional contributions from her next birthday to age 65, that this would buy her an additional pension. The letter went on to explain that the cost of buying one year of pensionable service is 4.22% of Mrs XXX’s pay and that the maximum contributions she could make is 10% which would buy 2 years 135 days. The Secretary of State notes that with regard to AVCs it was explained that illustrations of projected growth could be requested from Equitable Life. No mention was made in this letter about Mrs XXX being able to use any AVCs to buy membership in the LGPS.
7) The Secretary of State notes that in March 1999 Mrs XXX elected to make AVCs. In the same election she explained that as soon as the rules permitted she wished the AVCs to be transferred to the LGPS to buy “added years”. You have explained that this decision was reached after taking independent financial advice. No evidence has been provided that the council were aware that Mrs XXX expected the accumulated value of her AVCs fund would buy a period of at least 2 years in the LGPS. Nor have copies of the advice provided by the Independent Financial Adviser been provided, although it would not be possible for the Secretary of State to take account of, or comment on, any such advice. The Secretary of State’s powers are limited to ensuring that the rules governing LGPS have been correctly applied.
8) The Secretary of State has considered your contention that the council misrepresented the rules governing the LGPS. It appears you consider the information provided in Mr XXX’s letter of 20 July 1998 is a misrepresentation of the LGPS rules. The Secretary of State does not consider this is a misrepresentation as the information provided clearly concerned the additional membership that would be brought if Mrs XXX elected to pay additional contributions from her next birthday to age 65. As that was a period of some six years, and the letter explained the cost of buying one added year was 4.22% of pay, the Secretary of State deduces from that letter that the total cost of one added year (ignoring pay increases) would have been annual pay x 4.22% x 6, that is (on the figures you have provided) approximately £2970. Even if you had been led to believe that the purchase of added years and the purchase of AVCs would be on a comparable basis, the Secretary of State does not consider that the letter of 20 July 1998 could reasonably have led you to believe that Mrs XXX’s AVC pot of £994.32 should buy in excess of two added years.
9) The Secretary of State also notes that there is no reference in Mr XXX’s letter of 20 July 1998 to purchasing “added years” in the LGPS with the accumulated value of the AVCs. The Secretary of State notes that in March 1999 Mrs XXX elected to make AVCs for the tax year 1998-99 and that as soon as permitted she wished the AVC to be transferred to the LGPS to buy “added years”. In her election there was no mention that she expected this would a buy a minimum of 2 years membership in the LGPS, nor from the evidence available was the council asked for any information about this. The Secretary of State further notes that Mrs XXX made her decision after taking Independent Financial Advice. In the circumstances the Secretary of State does not consider the council have misrepresented the rules governing the LGPS in this matter but even if it was found that they had and it had led to financial loss or injustice the Secretary of State has no powers to award compensation.