Police Pension Regulations 2015

Pension Challenge – The Remedy

IODPA Admin Finance, Police Pension Regulations 2015, Uncategorized
Pension Challenge – The Remedy

Some of our members have received letters from their force regarding the Government’s intended remedy to the unlawful discrimination caused by the transitional protections under the Police Pension Scheme 2015 (the 2015 CARE Scheme) following the Court of Appeal decision in the McCloud and Sargeant cases.

At the time of writing this blog, we’ve only seen letters from Hampshire police, but we understand that a number of forces have now contacted their pensioners along similar lines.

All the letters so far have been to pensioners who left with ill-health retirement and were on “transitional protection” (a delayed transfer to the 2015 pension scheme). The letter offers the opportunity to be reassessed at the point of retirement under the 2015 scheme instead of their original scheme (1987).

A (redacted) copy of one of the letters can be found here –

 

 

In summary, the recipient of this letter was ill-health retired after 01/04/2015 under the 1987 scheme. The pensioner would have received an enhanced ill-health pension and commutation (if requested) from the 1987 scheme.

The 2015 scheme has, the concept of a lower and upper/enhanced tier for ill-health retirement. The lower tier under this scheme is the default position, unless the Selected Medical Practitioner (‘SMP’) considers that the retiring pensioner would be unable to perform 30 hours or more a week in regular employment at some stage in the future. If this is the considered opinion of the SMP, then the pensioner will also receive the upper tier in addition to the lower tier. We have provided a number of pension calculations over the years and find that this could enhance an ill-health pension by approx 3-4K per annum (depending upon your individual circumstances).

Potentially, this sounds like an attractive proposition, but as always, the devil is in the detail, and the letters poses more questions than they answer in our opinion.

What is not clear is if the pensioner agrees to be assessed for the upper tier under the 2015 scheme, do they at this point agree to be transferred to the scheme regardless of the outcome of this subsequent assessment?

The letter states that if the pensioner is not eligible for the upper tier, they may be reassessed (again) up to 5 years after the date of their retirement (which is built into the 2015 scheme and is not part of the pension remedy). It is not clear, how the pensioner may be reassessed again, at some stage in the future for a scheme that they are not a member of, unless they have, as previously suggested already transferred prior to the initial decision being made?

If you agree to the assessment, and transfer into the new scheme, what date will you transfer to the scheme, the date of your retirement or the date that the scheme started, most likely, it will be the start date, this being 01/04/2015? This variation of date will affect subsequent calculations.

They have not made it clear to you that if you transfer to the 2015 scheme your ill-health pension will need to be recalculated to take into account your transfer date to this scheme, at which point you will have two pension pots. Some people may be be in credit, some may be in debt because of the different contribution rates of each scheme.

Not only will they back calculate your ill-health pension under each scheme, they will also re-calculate any commutation that you may have taken as each scheme has different rules.

If you are in receipt of an injury pension as well as an ill-health pension, then whilst you may receive more for your ill-health pension (which is taxed, and will be now taxed more), this will also result in a lower injury pension (which is not taxed).

Whilst it is true that once you transfer to the 2015 scheme, you may apply for the upper tier (with medical evidence) for a period of 5 years after the initial grant, the force may also choose to reassess you at any time up until Compulsory Retirement Age (‘CRA’) and remove the upper tier from your pension, so your upper tier may be short-lived.

They have stated, that you do not need to provide any further medical information at this stage, but may request this before the reassessment goes ahead, and rather worryingly state that they will store your personal data securely. Personally, we wouldn’t trust any force with our personal data, and would only supply it directly to the nominated SMP who is the only person entitled to see this information. That said, there is NO information as to whom the SMP will be, and regular readers of our blogs will know that not all SMPs are equal.

Finally, as we believe that your choices are not mutually exclusive and some choices have dependencies on other choices, you can only reach a final decision once you have that additional information. This is particularly important as the Home Office has yet to rule on some of the decisions.

So unless you know the actual (financial) benefits of requesting such a move, how can an informed decision be made bearing in mind that this particular force require an answer from you by the 30th April 2023, but state that the rules for how they calculate payments for eligible members are not expected until Summer 2023!?

Is this a case of Hampshire Police putting the cart before the horse? The information that they have put out is certainly lacking.

This is a personal decision for members, but we would advise you to fully understand what you are entering into before you agree, and without figures, we’re not sure how you would assess this?

Speaking to a qualified pensions expert must be the next step for professional advice and guidance.

Should I Stay Or Should I Go Now? – The Police Pension Regulations 2015

IODPA Admin Police Pension Regulations 2015
Should I Stay Or Should I Go Now? – The Police Pension Regulations 2015

Should I Stay Or Should I Go Now?

— The Clash

 

The Government have now published their latest consultation document on the options available to officers who had their current pension scheme terminated and were automatically enrolled in The Police Pension Regulations 2015.

They have stated “members will be deemed to have accrued benefits in their legacy schemes, rather than reformed schemes for any … period of service between 1 April 2015 and 31 March 2022“.

If an officer has retired, or is going to retire between these dates, they will have the option to choose whether they wish their pension to be calculated solely in the legacy scheme, or whether they consent to transferring to the 2015 scheme and have their pensions calculated across two schemes.

The decision to remain in the legacy scheme or be retired under the 2015 is a personal and financial decision for the officer as each case is unique, but we’ll provide some areas for consideration before you make that decision.

There are essentially two categories of people that this decision will affect, those who have an Injury pension in addition to their, Ordinary, Ill-health, Deferred, or Short Service pensions, and those who don’t.

IODPA has provided a large number of pension calculations for members and non members over the years, and it is not true, that by switching back to your legacy scheme, you will necessarily be better off. Each scheme has different rules and conditions, and different remuneration depending on when and how you left.

First and foremost, we would recommend that you obtain an official projection from your pay department, so you know exactly what your figures would be if you stayed on the 2015 scheme, or if you reverted back.

If you cannot get official figures very easily, you can get a pretty good idea as to what your figures would be by going to the Emergency Lounge website (www.emergencylounge.com) and using the calculator there. We have been involved in the new version of the calculator which covers all three main schemes. These figures are for illustration purposes only.

Once you have your figures, the thing you have to consider are –

  • Transferring back to your legacy scheme won’t necessarily be at no cost to you as the contributory values of each scheme is different, so these contributions will have to be adjusted as well.
  • Changing schemes will affect the value of any commutation that you may have already taken. This could well be in your favour, but weigh this up with all the other considerations.
  • The 2006 and 2015 schemes for ill-health pensions both have the concept of lower and upper tier, based upon your ability to work in the future. This enhancement can be quite favorable, if you are deemed to be upper tier. Reverting back to the 1987 scheme would see this enhancement removed.
  • Changing the value of any of the pensions from the pension schemes will have a knock on effect of changing the value of your injury pension, as the injury pension is (partly) calculated on the value of these pensions.
  • It’s worth remembering that the pensions from the pension schemes are taxable, whilst the injury pension is not, so an increase in an ill-health pension will attract more tax, which in turn may reduce your untaxed injury pension.
  • Looking into the future, you should also be aware that the injury pension may be reviewed and therefore may go up or down, as is the upper tier of the ill-health pension. Conversely, the 1987 scheme has nothing to review (other then permanency, which all the schemes have anyway).
  • The value of switching between schemes is also determined by which scheme you came from and also the length of service that you would have in each scheme.

IODPA cannot give individual advice as to whether you should revert back to your old scheme. Hopefully the above has given you some indication about what you need to understand in relation to all the facts and figures before you in order to make an informed decision.

The most recent Government paper can be found here –