We have published the final decision on the complaint made by Mr Milne against the Government Actuary’s Department (GAD) about the factor used to convert his pension into a lump sum at retirement and whether the factors should have been reviewed earlier than they were.
Tony King, the Pensions Ombudsman, has decided in Mr Milne’s favour. The Pensions Ombudsman decided that the factors should have been reviewed between 1998 and 2005, when Mr Milne retired. He has directed GAD to assess what the factor would have been in 2005 if reviews had taken place and to notify the administrator of the relevant part of the Firefighters’ Pension Scheme so that they can recalculate the cash sum. He also directed GAD to pay interest on any additional cash sum, from Mr Milne’s retirement date.
See more at: PENSION OMBUDSMAN
The Government Actuaries Department [GAD] have prepared a technical note that includes the following:
The Ombudsman notes that, whilst his findings in the Determination are limited to Mr Milne’s complaint, the principles are the same for other retired firefighters and police officers. To avoid further cases having to be heard, he expects government to make arrangements for payments to be made to others affected, reflecting the more beneficial terms that would have applied had commutation factors been reviewed and, where appropriate, revised at the appropriate times. GAD has prepared tables for use in the calculation of redress, based on a best reconstruction of the commutation factors which would have applied if factors had been reviewed and revised at 1 December 2001 and at 1 December 2004. The mortality and related assumptions used in the development of these tables have been reviewed by an independent firm of consulting actuaries who have confirmed that the assumptions fall within the range that GAD might reasonably have chosen if it had prepared revised commutation factors at these dates. These tables will be passed to the relevant government bodies.
So it would appear that new factors should be applied to all those who retired after 1st December 2001 and those factors should be recalculated for those who retired after 1st December 2004.
Full GAD technical note available HERE
From the tone of the Ombudsmans determination and GAD's technical note it is obvious that they envisage and encourage this matter to be resolved as soon as possible and those eligible should be reimbursed the monies owed at the earliest opportunity. Extract from Ombudsman determination below:
There are also members of the Police Pension Scheme with the same interest. They will have retired at different points in time, so the result in Mr Milne’s case may not exactly apply to them. (The factors are also age and gender dependent, of course.) However, the principles are the same.
In theory every one of those retired members could complain to the Pensions Ombudsman Service – though there would be severe practical difficulties if they did, as mentioned above. However, bearing in mind GAD’s recent detailed work on what the factors should have been in 2001, I have every hope and expectation that GAD, the Department and all other interested bodies, including those representing fire and police authorities, will swiftly jointly consider what steps should be taken to ensure that further determinations are not necessary. That may involve discussion as to where liability lies, particularly as following the division of liability above is likely to be administratively burdensome. However, the particular public sector pocket or pockets used to make payments from is of no significance to the members. So I strongly recommend that the question of where liability ends up should be regarded as secondary to the members receiving as soon as possible such payments as they will be due.
A HM Treasury spokeswoman said the ruling would also have implications for police pensions. “The government accepts the Pensions Ombudsman’s determination in full and will ensure that the directions made in relation to Mr Milne are taken forward in due course,” she said.
“The government recognises that there may be other individuals who are potentially affected by the principles set out in this determination. Firefighters’ and police pension schemes across the UK will work to identify such affected individuals and ensure that appropriate payments are made.”
See more at: THEACTUARY
Since the outset NARPO have been following, and have taken a keen interest in the Police and Firefighter Commutation Factor claim lodged with the Pension Ombudsman.
To that end we have been in correspondence with the Ombudsman and as such have protected our members position in relation to the matter.
The matter is now reaching a conclusion and the Ombudsman determination is expected soon. In an effort to expedite the release of that determination John McDonnell MP has tabled an Early Day Motion in which he calls on the named departments to accept the imminent ruling by the Pensions Ombudsman and take immediate steps to pay any recommended awards, should indeed there be any.
We would ask that members consider writing to their MP’s asking them to support EDM 768 as tabled by John McDonnell MP.
The EDM can be viewed by using this link: http://www.parliament.uk/edm/2014-15/768
It has come to our notice that throughout England and Wales as Forces outsource their Pension Administrators to external or other providers, a large number of anomalies are arising; which have resulted in them identifying that a number of Pensions have been paid incorrectly, for a variety of reasons.
This has led to the Pensioner having been underpaid or overpaid for a number of years. In the event that you have been underpaid, the monies owed should be paid to you as soon as possible; if the Administrator is indicating that you have been overpaid it is important that you DO NOT agree to repay any monies; at least until you have established the exact reason for the overpayment.
Most of these overpayments will have been made as a result of 'mistakes' or 'errors' made by the Pension Administrator and in view of that you should follow the course of action as outlined in the below documents.
The Ombudsman has released an update regarding the progress of the claims and is currently dealing with one 'test' case. They have released a Question & Answer update which is available in full by clicking the link below.
The most pertinent point for our members at present is reproduced below:
No. The best thing to do is to wait and see what happens after we have decided the first complaint. As in the previous answer, if it is upheld, your own situation may be resolved satisfactorily. If it isn’t upheld, then it is unlikely that a complaint from you would be if your circumstances are similar. You would be able to make a complaint to us, but we’d expect you to explain what you thought justified a different outcome.
The Office of National Statistics has today released the Consumer Price Index for September 2014 as 1.2% down from 1.5% in August.
For those eligible for Pension Increase Police Pensions will rise by 1.2% in April 2015.
See ONS website for details at: ONS
At State Pension age, although the Police Scheme remains responsible for updating the bulk of your police pension, in line with the relevant index, the State becomes liable to index link the much smaller Guaranteed Minimum Pension element of your police pension. For a full explanation use the link below:
This is not the case however for those permanently resident abroad in a country where the state pension is frozen, which includes; Australia, Canada, New Zealand and South Africa.
In these cases the Police Pension Scheme, by a Treasury Direction (currently dated 6 July 2000) does not reduce their inflation-proofing and the full increase is applied.
See Home Office Library document below from page 21 onwards.
We are often asked why the Police Pension reduces when a member starts receiving their State Pension.
Please use the link below to view the explanation.
PUBLIC SECTOR PENSIONS OVERPAYMENT
Recent questions in the House of Commons and attendant publicity has highlighted an issue of overpayment of pensions to retired public sector employees including those in the police scheme.
This is a complicated issue.
In essence, the problem has to do with the Guaranteed Minimum Pension, its calculation, index linking and impact on the individual's Police Pension index linking.
Guaranteed Minimum Pensions were provided by public service pension schemes between 1978 and 1997. The problem will not affect any pensioner unless he or she is over State Pension age with service in this period and for whom the force have no record of a GMP.
It is estimated that between 1220 and 1830 (1% - 1.5%) police pensioners in England and Wales may be affected by this miscalculation. No overpayments are to be recovered but an adjustment will be made to the pensions of those affected in April 2009.
For those who require more details of the problem and its likely impact we have added a link to the relevant Home Office advice to forces: Home Office Circular 31/2008
To view the National Audit Office Report on errors in the Guaranteed Minimum Pension please use this link NAO report
The announcement of new commutation factors for the police pension scheme made at the Police Federation Conference in May 2008 resulted in a legal challenge to the original commencement date of those factors. The Judicial Review taken by the Police Federation was successful in achieving a new commencement date for those factors of December 2006. Throughout the legal process we kept members informed of progress with the challenge.
Members will be aware that the Fire Service Pension scheme is similar to the Police scheme. From the initial announcement of the ‘new’ factors in 2008, the Fire Brigades Union have taken a different approach to this issue and have encouraged their former members to complain of maladministration of their scheme as no increases to commutation factors took effect from 1998 until the recent increase. We are aware that a number of former police officers are in the process of making similar complaints. We have been in touch with the Pension Ombudsman’s office about this matter and the below statement is published on their behalf in an attempt to assist them. We will continue to be in contact with the Ombudsman over this matter and will consider publishing further advice once the Judicial Review process referred to in the statement is finalised.
‘A number of fire-fighters have complained to the Pensions Ombudsman that the tables of commutation factors of the Firefighters’ Pension Scheme should have been revised by the Government Actuary’s Department (GAD) earlier than they were in 2006, which would have resulted in larger lump sum benefits when they commuted part of their pensions on retirement. Whether GAD is within the Pensions Ombudsman’s jurisdiction is now the subject of court proceedings. Until those proceedings have concluded, which could be as late as autumn 2012, the Pensions Ombudsman cannot investigate the Firefighters’ complaints. The same applies in respect of similar complaints about the Police Pension Scheme. So the Pensions Ombudsman has said that it is reasonable for members not to submit such complaints to him between now (December 2011) and when those proceedings have concluded. If former police officers submit such a complaint to thePensions Ombudsman after proceedings have concluded, the timefrom December 2011 to when those proceedings are concluded, will not count when the Pensions Ombudsman looks at whether the complaint has been made in time.’
Police Pensions are currently Index Linked from age 55yrs and are increased in line with the Retail Price Index.
Pensions are uprated each April and the level of increase is determined by RPI in September of the preceding year.
The index used to uprate Pensions changed to the CPI in 2010 implemented April 2011.
For details of the increases applied see below:
HOW INDEX LINKING WORKS
The question of taxation of pension benefits in some circumstances following re-employment is proving a difficult subject to resolve.
NARPO have been working hard to provide answers and an acceptable solution to this problem since we became aware of it late last year. Whilst we agree that tax is a personal matter we have been the only representative organisation which has endeavoured to provide information and advice on this worrying topic. We will continue to seek a solution and provide that advice.
We also understand that ACPO and the Police Federation, whilst not in a position to provide individual advice, have also made representations along the same lines as NARPO to the Home Office seeking a fair solution to this problem.
One difficulty with this issue and the current position is, as we understand it, that several forces are independently making representations to HMRC to seek a solution. HMRC can from our own experience be cautious in their approach to matters such as this and this can prolong the process of negotiations. ACPO as a body is not involved in those negotiations, which are being conducted on a force by force basis, but, as well as making representations to the Home Office on this matter, ACPO has made similar representations to HMRC. It is our understanding that whatever results from the individual force dealings with HMRC, the Revenue will be seeking a single solution for all forces. This may take some time possibly up to two months to get a definitive answer from HMRC.
Whilst it may be difficult advice to accept, those affected might consider waiting for the outcome of those discussions before taking any further action.
If however you have been told by your force that you have a tax liability, one course of action would be to write to the force, expressing surprise at the position you find yourself in and seeking a written response from the force as to the actual tax payable and the specific reason for that tax demand. Once the force has responded, we still believe it appropriate to make a complaint of maladministration of the pension scheme, initially through the force pension Internal Dispute Resolution Procedure and eventually to the Pension Ombudsman.
This is a very complex area substantially influenced by individual circumstances. NARPO are not tax experts and those affected should actively consider obtaining independent tax advice.
Whilst we are unable to provide any tax advice to individuals, the below links to the technical pages of the HMRC website do contain further useful explanations of the current situation:
Please find several useful documents in relation to Pension Sharing below. This is a complex area and it is advisable to seek expert advice from one of our police divorce solicitors whose details are available on the Member Services page of our website.
The Court of Appeal has now handed down its decision in relation to the Governments switch to the CPI as the index used to uprate pensions.
As you will see the appeal was dismissed.