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ITEM PF17
PENSION
FUND COMMITTEE 22 FEBRUARY 2002
CONTRIBUTIONS
PAID TO SECURE PROVISION OF WIDOWERS’ BENEFIT
Report by
the Director for Business Support and County Treasurer
Introduction
- The current regulations
for the Local Government Pension Scheme (LGPS) came into force from
1.4.1998. These regulations gave employers in the pension fund the power
to improve the widower’s pension, enabling it to be based on the member’s
service from 1972 at no additional cost to that member. Prior to 1998
a widower’s pension would be based only on service after April 1988,
although the opportunity to use earlier service was available if married
women elected to pay extra contributions.
Employer’s discretion
- Using the discretionary
power within these regulations, Oxfordshire County Council, as an employer
within this fund, resolved in 1998 to provide this improved package
at no additional cost to the scheme member. Other employers within this
fund followed the County’s lead but each employer was required to make
its own determination.
- At the time the
County used this discretionary power, 45 women had elected to pay the
additional contributions, and of those, 19 were County employees and
10 were still employed. The additional contributions ceased after 31
March 1998.
- The resolution
mentioned in paragraph 2 above only applies to current scheme members
at the time of the resolution and future scheme members. It does not
apply to deferred scheme members and therefore the 9 County employees
that had left before the resolution retain their right to a widower’s
pension based on the contributions paid up to the date of leaving.
Double provision
- Shortly after
these regulations were introduced and the additional contributions stopped,
some of the scheme contributors asked what would happen to their contributions
previously paid. It was expected that the Department of the Environment,
Transport and the Regions, [now DLTR] would issue guidance to employers.
DLTR have provided informal suggestions but no formal instructions on
this matter. The contributions cannot simply be returned. The following
table shows the options available, with effects and considerations.
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OPTIONS
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EFFECT
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(a) Using
the employers’ discretionarypower to augment member’s service.
The additional contributions paid could be a means to determine
the additional membership.
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This
Council has a policy stating exercise of this discretion will
only be in exceptional circumstances. ‘Exceptional circumstances’
have not been defined.
A
separate case would need to be made for each woman when entitled
to an immediate payment of benefit on leaving.
Could
not be used for leavers before entitlement to immediate pension
payment.
Service
augmentation increases the member’s personal benefit and that
of the spouse.
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OPTIONS
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EFFECT
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(b) Increasing
the widower’s benefit only, as above but in the cases where
the scheme member has already secured maximum personal benefits.
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Considerations
as mentioned in the category above also apply but a change to
the Council’s policy would be required to provide this additional
cover.
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(c) Reimbursing
the contributions less statutory deductions.
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The
pension regulations do not provide powers to make such a payments
The Council has no general powers to make ex-gratia payments.
In a similar case, where an ex-gratia payment was used to resolve
the issue, the District Auditor was very critical of the Council’s
action.
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(d) Take
no further action.
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The
contributions were paid at a time when this was the only means
for most married women to provide a widowers pension within the
LGPS for service between 1972 and 1988. As soon as Oxfordshire
used the discretionary power to provide this cover with no extra
cost to members, the additional contributions ceased.
Had
a female member died before 1.4.1998 only those paying the contributions
would have provided a benefit for their spouse on service between
1972 and 1988.
In
the same way as a term insurance policy works when the cover is
no longer needed payment ceases with no additional benefit for
having paid the contributions.
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- There has not
been a specific sanction from the DTLR and therefore the questions posed
by the contributors remain unanswered. None of the above options offer
a satisfactory solution. Option (d) is the least problematical and treats
all contributors the same.
Financial Implications
- Contributors were
paying for the widowers pension either by regular additional contributions
as a percentage of pay, with tax relief, or alternatively contributors
could make a one-off lump sum payment. All contributions were paid into
the Oxfordshire Pension Fund.
- Five of the ten
current county contributors chose to pay by the one-off lump sum method.
The total amount received from these five contributors was £3450.65.
- The remaining
five contributors were paying an average of 0.71% per year of their
salary. The cumulative total contributions received up to the date of
the resolution was approximately £4100.00.
Staff and Environmental
Implications
- There are no staffing
or environmental implications.
RECOMMENDATION
- The Committee
is RECOMMENDED to approve option d) from the above table. The County
Treasurer is requested to contact the women employed by the County Council
to advise them of the decision and also to inform the other employers
within the Oxfordshire Fund.
CHRIS
GRAY
Director for
Business Support
Background
papers: Nil
Contact
Officer: Jenny Wylie, Pensions Manager Tel: (01865) 815530
February
2002
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