Current Pensions Issues - Report of the Scheme Manager
Agenda Item No: 5
Purpose of Report:
To update Board members on current and recent pension issues affecting the Nottinghamshire firefighter schemes.
That Board members note the content of this report.
Name: Beck Smeathers , Scheme Manager
Tel: 0115 838 8100
- The Local Firefighter Pension Board is responsible for assisting the Scheme Manager in ensuring the effective governance and administration of the firefighter pension schemes. In order to fulfil this responsibility, it is important that Board members are aware of significant pension issues and can be assured that these issues are being dealt with.
- Pensions have grown in significance over past few years. Nationally the Hutton review brought about changes to public service pensions and the introduction of a new firefighter scheme (FFPS 2015). Legal challenges have resulted in redress for some employees with retrospective membership allowed, as well as compensation payments. The outcome of the McCloud case is likely to add further complexities.
- The purpose of this report is to inform members of the Board of all current and recent pensions issues which are being or have been dealt with, and the implications of these issues. This report is an update on the report of the same title presented to the Board in July 2020 and that circulated for the cancelled meeting in March 2020.
Pension Scheme Administration
- The contract with Leicestershire County Council (LCC) to provide the pension administration function for Nottinghamshire, Leicestershire and Derbyshire Fire Authorities is being terminated with effect from the 31 December 2020.
- A full OJEU procurement exercise has been undertaken and the contract has now been awarded to West Yorkshire Pension Fund who have a proven track record of providing this service to numerous other Fire Authorities. The implementation process is now well under way and progressing in line with the timetable. West Yorkshire Pension Fund will take over the contract from December 2020. The new contract will deliver savings in the region of £15k per year
East Midlands Joint Pension Board
- The request for approval by the Secretary of State to set up an East Midlands Joint Pension Board consisting of Nottinghamshire, Leicestershire and Derbyshire Fire Authorities was submitted in June 2019.
- The required change in administrators (see sections 2.1 -2.2) now means that the request will need to be re-submitted once new administrators are appointed. Whilst the delay is disappointing, it does provide the opportunity to demonstrate how effectively the three Fire Authorities are working together to address the required change in administrators.
Transitional Protection for FFPS 2015 Claims - McCloud
- Following an employment tribunal and subsequent appeals, the transitional protections related to the 2015 Firefighters’ Pension Scheme have been found to be age discriminatory.
- The case was referred back to the Employment Tribunal (ET) to determine remedy. An interim declaration was made in December 2019 by the ET that claimants were entitled to be treated as if they remained in the 1992 or 2006 Firefighter’s Pension Schemes.
- Formal consultation on the changes to the transitional arrangements to the 2015 schemes was released at the end of July 2020. It affects those members who were in service on or before 31 March 2012. The consultation proposes giving this group the option to choose between receiving legacy or the reformed (2015) scheme benefits in respect of their service during the period between 1 April 2015 and 31 March 2022. This would enable the members to choose which option would suit them best.
- The consultation seeks views on the proposal, and in particular, on which of two possible approaches should be taken to making this choice:
Both approaches would give members the same choice, but they differ in the point in time at which the decision is made by the member.
It is likely that further legislation will need to go through Parliament to implement any changes. Until the remedy has been determined, current legislation remains in place.
The Home Office issued a note direct to Fire and Rescue Services on 21 August regarding the treatment of immediate detriment cases in the age discrimination proceedings. However, at present this remains informal guidance. It does not constitute detailed guidance that administrators and FRAs would need in order to act upon and FRAs would still need to make their own interpretation. The service is awaiting further clarity from the LGA.
- An immediate choice;
- A deferred choice at the point at which a member retires.
Firefighters Pension Scheme ValuationsThe firefighter pension schemes are subject to an actuarial valuation every four years. The valuation is carried out by the Government Actuary Department (GAD) with the purpose being to assess the total future liabilities of the schemes as at the valuation date. The results of the 2016 valuation were announced in the Autumn 2018 following several delays.
The regulations for the 2015 scheme include provision that if the cost of the scheme changes by 2% or more then corrective action needs to be taken to bring costs back in line. The valuation fell below the 2% cap and as a result, changes to employee contributions or benefit accruals were initially proposed. However, any changes have been suspended by the Government pending the outcome of the McCloud remedy (see section 2.5 -2.10).
The 31 March 2020 valuation is now underway with data due to be submitted to GAD by 31 December 2020. The Leicestershire pension admin team are collating the information prior to the transfer of services to West Yorkshire Penson Fund.
The outcome is expected to be further complicated by the McCloud judgement and the results may be delayed as a consequence.
Checking and Reconciliation of HMRC Pension RecordsThe State Pension has been reformed, with a new single tier State Pension which came into force on 6 April 2016. The old system had become very complex with the “State Earnings Related Pension Scheme (SERPS)”, the “State Second Pension” and the “Additional Pension” as well as the basic State Pension. The new State Pension removes these complexities and consists of one flat rate pension.
As reported to the Board in previous meetings, a national guaranteed minimum pension (GMP) reconciliation exercise has now started, which involves all occupational pension schemes. Her Majesty’s Revenue and Customs (HMRC) is sharing its pension records with pension administrators and asking them to check this data for individuals against their records and investigate and resolve any discrepancies.
As a direct result of this reconciliation exercise, the Pension Administrator has identified 9 cases of small errors. All of these have been previously reported to the Board. To date 543 records have been reviewed and there are outstanding queries on 27 of these.
The government’s deadline for completion of the whole exercise was December 2018. This has clearly been missed but HMRC staff are working hard to turn queries around as quickly as possible. This will need to be monitored if these cases are not resolved at the time then new administrators take over.
Taxation of Ill Health PensionIn March 2017, the Pension Administrator informed the Scheme Manager that ill health pensions awarded to Retained Duty System employees on the grounds of injury should not be taxed at source. This followed a communication from the LGA’s national fire pension technical adviser on the matter. Ordinarily ill health pensions are taxable, but there is a tax regulation which provides an exemption in these few cases.
For Nottinghamshire, 8 cases have been identified, the individuals’ pensions were corrected from April 2017. The LGA issued guidance around this issue in September 2017, which indicated that only 4 years may be claimed back from HMRC. This has been claimed back by the Authority on behalf of members and has been refunded to members accordingly. Any years going further back would be a cost to Fire Authorities although there remains some confusion regarding when the additional liability first started and this is making the matter difficult to resolve since the LGA have been unable to negotiate a common position.
Communications with Scheme MembersThe detail within this report indicates that the area of fire pensions remains high profile, with a great deal of work currently in progress. In addition to the issues outlined above there are also some potentially significant taxation issues for individual members arising from their fire pension scheme membership. Whilst it is outside of the remit of Officers of the Authority to provide advice on personal taxation issues to pension scheme members, the Pension Ombudsman has made it clear that employers are expected to provide sufficient information to members on such issues to enable members to make their own decisions on matters which affect their personal finances. To assist in this, the LGA have issued some proposed wording in their
FPS bulletin 34 (.pdf Opens in a new window) to include on future job adverts to raise tax awareness.
The last regional pension roadshow was organised by Leicestershire Fire Service back in March 2019. Employees of all 3 regional Fire Services were invited to attend, although the offer was only taken up by 18 members of staff (3 from Nottinghamshire). The disappointing turnout has prompted the authorities to consider offering the next roadshow to be delivered virtually, eg via Zoom. Regional discussions have taken place regarding the timing of this event, and it was determined that Spring 2021 would enable the new administrators to be introduced and provide information regarding changes to the service that members will experience. It is also hoped that there will be more information at this point regarding the McCloud judgement.
The Annual Benefit Statements (ABS) have been issued in accordance with the deadline of 31 August 2020. Given the staffing pressures on the administration team and the issue that they will not be correct following the McCloud judgement, the decision was made not to include the forward projection of pensions for the 2019/20 ABS.
Information regarding the change of administrators was included in the Informative in July.
Independant Disputes Resolution Proceduce (IDRP) CasesThere have been no new IDRP cases during this financial year to date.
Pension DiscretionsThere have been no pension discretions in the financial year to date
Significant Breaches Reported to the Pensions RegulatorThere have been no breaches identified in this financial year to date. The Breaches Register is attached at Appendix 2.
Returns / Surveys CompletedThe TPR Annual Pension Return will fall due in November 2020 and will be submitted by the Scheme Manager on behalf of the Pension Schemes. Failure to submit the returns on time is a breach of pension legislation. The returns provide basic information regarding Pension Board make up and number of members within the scheme.
Training / EventsThe Scheme Manager has attended the following pension related events since the last Pension Board meeting:
Training and Events
|Regional Pension Admin meeting||04 December 2019|
|Pension Administration Project Board meeting||22 July 2020|
|Pension Administration Project meeting||02 September 2020|
|Fire Fighters Pension Scheme conference||23 September 2020|
There are no financial implications arising directly from this report. Any financial implications for the Authority will be reported to the Finance and Resources Committee.Human Resources and Learning and Development Implications
There are human resources implications arising directly from this report, in that pension matters affect most employees. HR department staff are fully involved in pension issues to ensure that human resources implications are taken into account.Equality Impact Assessment
An equality impact assessment has not been carried out as this is not a new policy.Crime and Disorder Implications
There are no crime and disorder implications arising from this report.Legal Implications
The Public Service Pensions Act 2013 introduced a framework for the governance and administration of public service pension schemes. This report aims to fulfil the requirement for Pension Board members to assist the Scheme Manager in ensuring that effective administration arrangements are in place.Risk Management Implications
There are a number of risks relating to the firefighter pension schemes, and these have been presented to the Board in the form of a risk register. The Scheme Manager is responsible for ensuring that the risks identified are appropriately managed. All of the issues outlined in this report are being, or have been dealt with by close co-operation between the pension administration team and Officers.Recommendations
That Board members note the content of this report.Background papers for inspection (Other than published documents)