In a recent court case, several recently retired officers from Essex Police and the Avon and Somerset Constabulary brought a joint action by way of judicial review against a decision made by the Pensions Ombudsman.
The Ombudsman had received numerous complaints that both forces had incorrectly told them their retirement lump sums (commutation) would be tax free. The individuals concerned had retired on full ordinary pensions, and had then taken up new employment within one month of leaving their force. The Finance Act of 2004 penalises people under certain conditions for taking pension benefits where they have retired under the normal minimum pension age, this being 55.
The pensioners found themselves liable to pay a substantial tax charge on the lump sum as well as their annual pension until they reached the age of 55.
The Home Office had issued a circular on the issue, and HMRC had published the changes in their Registered Pension Scheme
Manual and so the respective forces should have been well aware of the tax implications to their ex-employees.
The High Court found that the Chief Constables were not liable for the adverse tax consequences, but the Police and Crime Commissioner for Avon and Somerset Constabulary was in their particular case. Additionally, due to the fact that certain papers submitted in the Avon and Somerset case, were found to be missing in the Essex case, the Judge remitted the case for the Essex Police and Crime Commissioner back to the Pension Ombudsman for a decision. The Judge concluded that had the unseen Essex papers been found to be similar to those of Avon & Somerset, then he would have made the same decision for the Essex claimants.
The case is Corsham and others v Police and Crime Commissioner for Essex, Hazel and others v Chief Constable of Avon and Somerset Police and others (2019) EWCA Civ 676, a copy of which may be read here –