Agenda item

To consider the attached report.

 

Officers have advised that under the Local Government Pension Scheme (LGPS) regulations the London Borough of Havering, as the administering authority of the Havering Pension Fund, have been given some responsibilities and discretions.  Some of these discretions had last been reviewed in March 2010 and had now been updated following the regulations introduced with the LGPS 2014 scheme.  A complete review of all the required Administrative Authority discretion decisions and policies had also been undertaken with support for the Fund Actuaries.

 

The new scheme had been operational from 1 April 2014 and there was a regulatory requirement under the LGPS 2013 (Regulation 60) and Transitional Regulations 2014 (Schedule 2, Paragraph 2) for the administering authority to agree the new and revised discretion decisions and a Policy Statement before the 1^st July 2014.  It had been also understood that where the 1^st July was not achievable the Pension Regulator would only seek assurance that the employer or Administrative Authority were working towards completing the review of the Policy Statement and discretions. 

 

An in-depth review of the of the discretion decision requirements in following regulations had been carried out:

 

-       Local Government Pension Scheme Regulations 2013;

-       The Local Government Pension Scheme (Transitional Provisions and Savings) Regulations 2014 (The Transitional Regulations);

-       The Local Government Pension Scheme (Administration) Regulations 2008 (The Administration Regulations);

-       The Local Government Pension Scheme (Benefits Membership and Contributions) Regulations 2007 (The Benefits Regulations);

-       The Local Government Pension Scheme (Transitional Provisions) Regulations 2008;

-       The Local Government Pension Scheme Regulations 1997;

-       The Local Government Pension Scheme Regulations 1995.

 

Discretion was taken to include where the Administering Authority was required to carry out a task but an element of choice was seen to exist as to how the task was completed.

 

A number of the discretions were subject to the formulation and publication of a written policy, but there were many more where there was no requirement for a written policy but where there might be an element of choice.  The proposed discretion statement included those discretions which required a written policy and those were there might be an element of choice. 

 

We have noted that not all discretions needed to be published; however, it was the intention, for reasons of transparency, to publish the decisions taken in relation to all the available discretions.  If the discretion decisions and policies were approved, the discretions would be published on the Havering Pension Fund’s website and would be circulated to Employer’s participating in the Fund.

 

Our attention was brought to the following discretion areas, i.e. abatement, Employing authority defunct and Additional Pension contributions.

 

1.    Abatement

 

There was a regulatory change to a previously written discretion relating to the policy to abate (reduce) pensions following re-employment, this was now Regulation 3(13), The Transitional Regulations and was previously Regulation 109 of the Local Government Pension Scheme Regulations 1997 and regulation 70(1) of the 2008 Administration Regulations. 

 

Previously the Council Policy had been to abate the retirement pension when a scheme member who was in receipt of a pension from the Council’s Fund entered a local government employment where they were eligible to join the scheme.

 

Abatement of pensions upon reemployment has been removed from the 2013 Regulations in respect of membership accrued from 1 April 2014.

 

The abatement policy was still applicable to members (and Councillors if relevant) who left the Scheme before 1 April 2014.  Furthermore, the 2014 Transitional Regulations still require a policy on the abatement of the pre 1 April 2014 element of a pension in payment following re-employment. 

 

Abatement could be seen as a protection mechanism for the fund in order to prevent an abuse of early retirement policies (efficiency of service redundancy) in circumstances where those individuals might be re-employed soon afterwards, performing similar roles and responsibilities within the organisation.  However, many such redundancies might have been to address real budgetary restraints, but that drops in service levels then required the employers to recruit former staff to realise service improvements and use experience.  Abatement was also seen as a disincentive for suitable skilled individuals returning to local government employment, denying employers access to the widest pool of available skilled human resources.  Furthermore, with the introduction of flexible retirement into the LGPS, where abatement did not apply, it could also be argued that someone who would be subject to abatement (because they retired outright) was being disadvantaged compared to someone who was able to retire flexibly.  Lastly, pension benefits paid under the new LGPS 2014 Regulations are not subject to abatement.

 

We have agreed, therefore, subject to meeting the requirement to consult with the other scheme employers participating in the Havering Fund, that the policy be amended to:

 

            From 1 April 2014 the revised policy was to not abate or reduce the pensions of former members who became re-employed with regard to any period of membership before that date.  Abatement of pension payable should continue in respect of any pensioner member who gained further employment covered by the LGPS before 1 April 2014.

2.      Participating Scheme Employer has become Defunct

The regulations required an administering authority to exercise its discretion for some of the employing authority discretions where the participating employer had become defunct.  These discretions, in general, deal with the early release of pension benefits and therefore each case should be considered on its individual merits; however, where this would result in a cost for early release, a business case would have to be approved justifying that cost.  However, where there was a cost, this cost would have to be spread across all employers.

 

3.    Additional Pension Contributions

 

Additional Pension Contributions (APC) or Shared Cost Additional Pension Contributions (SCAPC) were used in the new regulations to cover a number of situations where a member, and/or the employer would make payments to cover a shortfall in contributions.  These shortfalls could arise from a variety of situations such as maternity leave, paternity leave, adoption leave, unpaid leave and reserve forces leave.

 

Regulation 16(1) gave the Administering Authority the discretion to refuse to request to pay an APC over a period of time where it was impractical to do so.  The discretion decision recommended that this decision was delegated to officers, who would be able to assess any such requests.

 

APCs would also replace the previous options, known as Added Years and Additional Regular Contributions, allowing members to buy additional membership or pension respectively.

 

Under the previous regulations where a member had asked to purchase additional membership or pension any application had been subject to receipt of a medical report, confirming the members was in good health.  This was because once a contract had started if the member then had to retire on grounds of ill-health, or the member dies, the contract was deemed to be fully paid up.  It was therefore recommended that the Committee approve the need for a GPs declaration that the member was in reasonable good health before any such contract was agreed.  However, if payment was due to be made in one lump sum no GP declaration would be required since the contract would not be valid unless the payment had been received by the Fund.

 

Regulation 17(12) introduced a new discretion for the Administering Authority to determine where Additional Voluntary Contributions (AVC) monies should be paid on the death of a member.  This was further extending the current provision where the Administering Authority was required to decide to whom a death grant was paid.  In order to make timely decisions and payment to beneficiaries it was recommended that the new provision is delegated to officers unless it was a contentious case, which was then referred to the Pension Panel.

 

4.    General Issues

 

Whilst the list of discretions sets out the general position, the Council must consider every application on its merits.  Where there were extraordinary or justifiable circumstances, a departure from the general discretion approach listed might be appropriate.

 

In reviewing the discretions and making recommendations for the application of the discretions by the Administering Authority, the Fund Actuaries had ensured that each discretion was exercised in a manner that did not ‘fetter’ the discretion, and ensured decisions taken would review the individual circumstances of each particular case as necessary. 

 

The recommendations also ensured that the discretions were carried out:

 

·                     In a fair and reasonable manner;

·                     Without knee jerk reactions;

·                     With consistency;

·                     With flexibility for any peculiar circumstances;

·                     With potential for review to allow consideration of changes.

 

The discretions would be reviewed every three years in line with the triennial valuation, to coincide and take account of the results of the valuation.  Where there were regulatory and legislative changes that impact on discretions, a review would be carried out on those between valuations under delegation to the Pension Panel. 

 

Having considered the report  we have:

 

a.    Approved the revised and reviewed Administering Authority’s Statement of Policies following the introduction of the Local Government Pension Scheme 2014 (as attached as Appendix ‘A’ to the report;

b.    Approved the delegations contained within the Administering Authority’s Policy document and discretionary decisions;

c.    Noted that any major discretionary decisions made by the delegated persons would be reported to this Committee for information on a regular basis;

d.    Noted that the discretions would be brought to Committee for review following the next triennial valuation, or earlier dependent upon further regulatory changes; and

e.    Approve the delegation of revisions to the discretions between the three yearly review to the Pension panel where there were regulatory or legislative changes.