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Corsham and others v Police and Crime Commissioner for Essex and others; Hazell and others v Chief Constable of Avon and Somerset Police and others (2019) EWCA Civ 676
This judgment concerned appeals against the decision of the Pensions Ombudsman dated 21 August 2018, which dealt with eight separate complaints which had been made to him and raised essentially the same issues. The Ombudsman dismissed all eight complaints.
In Corsham v Police and Crime Commissioner for Essex, the High Court found that a police authority was liable for negligent misstatement where it told members their retirement lump sums would be tax free in circumstances where they actually knew that scheme members were being re-employed shortly after retirement with the result that they would lose their protected pension age and hence be subject to punitive tax charges. In so doing, the High Court overturned the decision of the Pensions Ombudsman.
If there are any members who have a protected pension age and choose to retire before age 55, scheme administrators should ensure that any standard form communications set out the circumstances in which members could lose that protection. Otherwise, they risk being found liable for negligent misstatement.
In this case, the High Court found that a police authority was liable for negligent misstatement where it told members their retirement lump sums would be tax free in circumstances where they actually knew that scheme members were being re-employed shortly after retirement with the result that they would lose their protected pension age and hence be subject to punitive tax charges.
Further, although not finding it necessary to decide the point, the High Court did not rule out a finding that, even where there is no specific knowledge that particular members would be re-employed within one month, the police authority ought to have included some precautionary words about re-employment within one month of retirement when sending out its standard form letters to every retiring police officer.
The High Court found that the police authorities in this case, in their capacity as scheme administrators, ought to have known of the relevant provisions in FA 2004. FA 2004 Act made significant changes to the tax treatment of pensions, the changes were widely publicised and it seemed wholly improbable that nobody at the relevant bodies had informed themselves of these important changes.
Further, HMRC took steps to assist scheme administrators, such as the police authorities, to know and understand and apply the law, eg by making available the Registered Pension Schemes Manual. In addition, the Home Office published a specific circular informing police authorities, as scheme administrators, of the tax changes coming into effect on A-Day.
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