LOCAL GOVERNMENT PENSION APPEAL

SUPERANNUATION ACT 1972

OCCUPATIONAL PENSION SCHEME (DISCLOSURE OF INFORMATION) REGULATIONS 1996 (the Disclosure Regulations)

LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)

1.                  I refer to your letter of 10 April 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 in relation to your local government pension scheme (LGPS) dispute with XXX Council (the council).

2.                  The Appointed Person upheld the council’s decision not to allow you to change your decision to use your accumulated Additional Voluntary Contributions (AVC’s) to purchase an additional membership period in the LGPS.  You consider your complaint was not adequately dealt with by the Appointed Person.  In the main you consider your complaint to be about maladministration in that there was unreasonable delay and inadequate notification to you of your benefit payment on early retirement.  If you had this information before you elected to use your accumulated AVC’s you feel it could have prevented you from incurring financial loss.

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.  There are no provisions to award compensation where claims are made that information has not been provided with regard to the LGPS or where it is shown that maladministration has taken place leading to financial loss or injustice.  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 your decision to buy membership with the accumulated value of your AVC’s constituted a valid election under regulation 66 of the 1997 regulations.

5.                  The Secretary of State has considered all the representations and evidence.  Copies of documents supplied by the Appointed Personwere sent to you under cover of the Department’s letter of 10 May 2000.

6.                  Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations.  He finds that your decision to buy membership with the accumulated value of your AVC’s constituted an election under regulation 66 of the 1997 regulations and that there is no facility to annul it.  Furthermore, he cannot order any redress in this case or award compensation even if it were shown that maladministration had taken place leading to financial loss or injustice.  His decision confirms that made by the Appointed Person.  The Secretary of State’s reasons and the regulatory provisions which he considers apply in your 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).

EVIDENCE RECEIVED

1.                  The following evidence has been received and taken into account:

(a)               from you: letters dated   10 April and 25 May 2000 (with enclosures); and

(b)               from the Appointed Person: letter dated 2 May 2000 (with the enclosures copied to you with the Department’s letter of 10 May).

REGULATIONS CONSIDERED AND REASONS FOR DECISION

2.                  From the evidence submitted the following relevant points have been noted:

(a)               on 13 March 1999 the council provided you with an estimate in writing that your Equitable Life AVC fund of £6,778.91 would buy you an additional 1 year 30 days LGPS membership period and estimates from Equitable Life on other options for investing your AVC’s;

(b)               on 1 April 1999 your employer confirmed their agreement to your early retirement with maximum added years to your benefits;

(c)               on 10 April 1999 you wrote to the council to confirm that you wished to take the option offered by them to buy additional membership;

(d)               on 17 May 1999 you retired on early retirement terms; and

(e)               on 27 May 1999 the council sent your pension benefits payment notification with details of the calculation.

3.                  You appealed to the Appointed Person against the council’s decision because you feel you were not properly informed.  The Appointed Person found that the election could not be withdrawn and that while the council did provide information this did not extend to investment advice.

4.                  The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply.  Regulations 60 to 66 of the 1997 regulations apply to the payment of AVC’s and benefits that can be provided.  Regulation 64 deals with retirement benefits.  Regulation 64(2) required that when you retired the council must use the accumulated value of the invested contributions to provide additional pension benefits under a pension policy as soon as reasonably practicable.  Regulation 66 refers to elections as to the use of the accumulated value of AVC’s.  Regulation 66(3) explains the options where regulation 66(1)(a) applies, and these appear to be the provisions used in your case.  The options included buying additional LGPS membership or annuities from AVC insurance companies. Entitlement to retirement benefit must be decided by a member’s employer as soon as reasonably practicable after employment ends (regulation 97) and the member must then be notified as soon as reasonably practicable (regulation 98).

5.                  The Secretary of State has considered all the representations and evidence.  He notes your contention that there was an unreasonable delay in notifying you of your pension benefits which constituted directly to your financial loss.  The Secretary of State notes you retired on 17 May 1999 and the benefits notification was sent to you on 27 May 1999.  The regulations, and the rules governing disclosure of information, do not require notification of benefits to be made before retirement.  The Secretary of State notes that the benefits were provided within regulation 97(4) and (5) required the council to decide the amount of benefit as soon as reasonably after your retirement.  The Disclosure Regulations required the council to inform you within two months of retirement.  The Secretary of State does not consider that there was an unreasonable delay.  Nor did it contribute to financial loss because the amount of benefit simply reflected the decisions on entitlement which had already been taken.

6.                  In the Secretary of State’s view, however, the question revolves around your contention that you were given inadequate information by either the council or your employer on which to make a decision on what to do with your AVC fund, in that you were not made aware of the potential effect of opting to purchase additional scheme membership on the maximum of added years which could be awarded.

7.                  The Secretary of State notes that your AVC fund options were a matter between you and the council, whereas the decision whether and how many added years to award was for your employer to make under the Local Government (Discretionary Payments)  Regulations 1996.  Both matters were being separately considered by the respective bodies around the same time.  It is not clear from the evidence whether the council were aware, when they advised you of your potential AVC fund benefits and options, that your employer might be considering an award of added years.  It is noted that the council gave you an estimate of what membership your AVC’s would purchase in the LGPS on 13 March 1999, and that your employer agreed to give maximum added years on 1 April 1999.  It is also not clear from the papers whether your employer was aware, when they agreed this, that you might wish to use your AVC’s to buy scheme membership.  It is noted that you opted to do so on 10 April 1999 and informed your employer on 12 April 1999 after their decision on added years had been made.

8.                  It has been contended that the relevant administering authority in the context of the LGPS is not under an obligation to advise individual members.  This would clearly be the case if an individual approached an authority to help choose between two options.  However in order for an individual to make their own decision or to be able to seek proper independent financial advice the information on terms and implications of options available needs to be made available.  Without such information – not advice – an individual is unable to make a reasonable decision.

9.                  Such would appear to be the case in this instance.  Would you have used your monies from your AVC to purchase a period of added years if you knew this would merely reduce the period of added years being awarded to you by your employer?  If you had not used your AVC monies in this way you would have been able, subject to the Inland Revenue maximum benefit rules, to increase your pension above the £14,557 now payable.  Electing to use your AVC monies to purchase a period of added years does not appear to be the decision of a reasonable person in the circumstances.  The Secretary of State is therefore satisfied that you did not have sufficient information to make a reasonable decision, and he accepts that the council do not appear to have informed you of the full implications of the options available to you in relation to any award of added years.  He is less clear, however, that the council would have been aware that an award of maximum added years was an issue in your case, and he cannot conclusively say that this amounts to maladministration, though it has clearly led to financial loss.

10.              However under the terms of the LGPS Regulations, which limit the extent to which the Secretary of State can provide a remedy, there is no facility to annul your election.  If this is a failure of administration it is not a matter the Secretary of State can rectify or for which be can provide compensation even where it is shown that this has led to financial loss or injustice.

11.              In view of the fact that the council had computed what your AVC’s could purchase in terms of added years two months before you retired on 13 May 1999 and the retirement date was apparently confirmed the terms of your retirement on 1 April the Secretary of State takes the view that the council had a duty in such circumstances to inform you of the consequences to your LGPS pension of an election to buy added years with your AVC’s and that this may constitute maladministration.  However, the he has no power to order redress which would conflict with the requirements of the regulations of the regulations or to award compensation even where it is shown that maladministration has led to financial loss or injustice.