Report of the Assistant Director People Services

The Panel considered a report of the Assistant Director People Services (ADPS) which provided an update on the changing position in regard to Age Discrimination, Remedy & Immediate Detriment Cases in the Firefighters’ Pension Schemes and the recommended approach for the Service.  The update followed the decision made by the Panel in November 2021 to adopt the Local Government Association (LGA) and Fire Brigades Union (FBU) Framework for Managing Immediate Detriment Issues for dealing with those cases retiring before legislation was due to be passed in October 2023 and the subsequent withdrawal of Home Office guidance on processing certain immediate detriment cases.  In withdrawing its guidance the Home Office explained that due to the complexity of the situation it did not advise schemes to process any immediate detriment cases before legislation was in place.  In December 2021 a decision was made by the Fire Authority to pause the processing of any immediate detriment cases.  Officers now had assessed the options available as to how best to proceed and these were set out in the report for the Panel to consider.  The ADR/T stressed that the options were based on officers giving the best advice they could, given the uncertainty and changing nature of the matter.

The Payroll, Pensions and HR Assurance Manager explained that there were four possible options for the Authority:

-       Restart the paused position and action Immediate Detriment for both retirees and pensioners in retirement.

-       Remain paused whilst further information and guidance was obtained.

-       Opt out of Immediate Detriment entirely until the Full Home Office remedy was published.  This would effectively mean that any retirees from January 2022 until October 2023 would have to wait for their legacy Pension entitlement.

-       Revert to its approach agreed in the Summer 2021 and continue with paying legacy benefits for those due to retire in the coming months (category 1 cases) but not revisiting those already in retirement until there was more certainty of how to action the retrospective changes (category 2 cases).

The Deputy Monitoring Officer informed the Panel that she was satisfied the Service had the ability to make payments on the basis of the power to compromise actual or threatened proceedings.  She added that there was more certainty over the position on those individuals that were due to retire and less on those that had already retired.

The ADR/T referred to Home Office communication that made it clear that the Government would not be providing any funding to compensate services for any additional payments which they may make which fell outside of the pension account and explained that lump sums and backed dated revised payments constituted scheme costs.  Non scheme costs included tax charges on additional lump sums which were paid over 12 months after retirement, interest on those payments at 3% per annum, contribution holiday compensation payments and scheme pays compensation.  The main are of uncertainty was in relation to additional employee contributions which were due when an individual reverted from the 2015 scheme to the 1992 scheme.  Officer’s view, in the light of the McCloud / Sergeant judgement, was that the contributions to the 2015 scheme should be treated as if they were contributions to the 1992 scheme and the net additional contributions should be subject to tax relief if paid via payroll and not if paid from a pension lump sum.  In the latter case there was a risk if HMRC did not make arrangements for tax relief to be claimed at a later date that the Authority may be liable for compensating individuals accordingly.  He added that there was significant uncertainty over the tax implications and liability but it was important to remember that these risks were sector wide and that the Chair of the Firefighter Pension Scheme Advisory Board had written to the Treasury seeking further clarification on these and other aspects of their guidance note.  The Service had approached its own tax advisors for advice on the matter.  It was noted that the exposure for the liability of any additional tax charges should the Authority progress with the category 2 cases was thought to be in the region of £30-£50k.  The majority of these costs may be mitigated if changes were made by HMRC to tax regulations for the 2022/23 tax year and payments were made after that date.  The ADR/T summarised that he would recommend delaying the consideration of the category 2 cases until more was known as to whether the tax liability would be mitigated, reducing the Authorities financial exposure.  He suggested that there could be a further update to the Panel in May when Her Majesty's Revenue and Customs (HMRC) position had been established.  The Payroll, Pensions and HR Assurance Manager added that it was thought that the cost of any legal challenge to opting out of Immediate Detriment entirely was likely to exceed the cost of continuing until the tax liability had been confirmed.

The Panel dismissed the option to opt out of Immediate Detriment entirely as they did not think it acceptable for all retirees and pensioners to have to wait for the situation to be resolved.  Further discussion was had over the option to progress category 1 cases but pause those in category 2 which would apply to approximately 6 cases.

The CFO highlighted the difficult nature of the situation and added that different positions were being taken across fire and rescue services.  She was aware that two cases had recently been settled out of court as the risk of potential legal costs and payments outweighed the risk of making payment under the current framework.  There was the wider risk to industrial relation issues and staff were feeling frustrated by the long-running nature of the matter.  Clarity on the outstanding issues was being sought by all parties.  The CFO agreed that option 4 was the best way forward, all things considered. 

The Panel agreed that option 4 most was the most satisfactory given the circumstance and noted that the LGA and National Fire Chiefs Council were actively involved in seeking to resolve the outstanding matters.

RESOLVED: That the Panel agreed that the Authority revert to its approach agreed in the Summer 2021 and continue to pay legacy benefits for those due to retire in the coming months but would not revisit those already in retirement until there was more certainty of how to action the retrospective changes.