Ely Internal Drainage Boards

Ely Group of Internal Drainage Boards

The Drainage Office, Main St, PRICKWILLOW, Nr Ely, Cambridgeshire, CB7 4UN

Burnt Fen Pension Discretions Policy

Local Government Pension Scheme Employer Discretion Policy

1. Introduction

1.1. The Local Government Pension Scheme (LGPS) is a statutory scheme and participation as an employing organisation is governed by statute. Most of the rules and regulations are determined by the Government.

1.2. The Burnt Fen Internal Drainage Board is an employer member of the Cambridgeshire LGPS Fund and as at 01.04.19, all staff members has opted to join the scheme.

1.3. Some areas of the LGPS are left to employers’ local discretion and where there is a requirement to have a local policy in place, for certain matters within scheme regulations, not doing so means that the employer (IDB) is in breach of its Statutory responsibility and is liable for this breach. There is in effect a regulatory requirement concerning the operation of certain discretions.

1.4. The LGPS Regulations 2013 and previous legislation makes it a statutory requirement that an “employer publishes and maintains a written policy on the exercise of certain discretions”.

1.5. These employer discretions must be formally determined by the Board, a written policy must be published and maintained and it is a requirement on the Board to notify the administering authority of the LGPS in Cambridgeshire on what basis the local discretions will be operated. As these discretions have recently been amended, it is necessary to review the policy statements.

1.6. This duty to publish and maintain a policy is because such policy decisions have immediate costs but they may also have long-term, additional liability consequences which could affect each Board’s employer pension contribution rate for many years.

1.7. The Board has a duty to bear in mind its fiduciary duties, as a controller of the public purse, when devising policy on the exercise of LGPS discretions and the Board needs to be able to demonstrate this duty.

2. Background

2.1. Following the Government’s fundamental review of public sector pensions provision, it was agreed that changes were required to these schemes:-

• All public sector pension schemes should change from final salary pension schemes to career average revalued earnings schemes.
• Scheme retirement ages should be the same as state retirement pension ages.
• Scheme members and employers should share the increasing costs of providing public sector pension schemes.
• Existing rights of current scheme members should be protected.

The new LGPS accommodates all of these requirements.

2.2. Benefits accrued prior to 1st April, 2014 are largely unaffected by the new scheme and that element will continue to be assessed on a final salary basis rather than a career averaged scheme.

2.3. The Board’s pension policy requires review. The proposed new policy is set out in Appendix A.

2.4. The Regulations require that in preparing or making revisions to its pension policy statements, the scheme employer must have regard to the extent to which the exercise of any of its policies could lead to a serious loss of confidence in the public service.

3. LGPS employer’s duty to publish and maintain policies

3.1. Employers must publish and maintain policies on:-

• Power of the employer to increase total membership of an active member.
• Power of employing authority to award additional pension.
• Flexible retirement.
• Choice of early payment of pension.

3.2. In the interests of transparency and consistency, employers should also have policies in place to cover other discretions, including ill health and redundancy.

4. Why an Employer Discretion Policy is necessary

4.1. The purpose of the Board putting in place a local policy on pension discretions is to:-

• Demonstrate a clear and consistent approach when making first instance decisions.
• Protect the Board by making transparent decisions.
• Remove from the decisions personal criteria, enabling the Board to evidence clear and consistent application of discretions.

5. Pensions Discretion Policy

5.1. Attached at Appendix A is a Pensions Discretion Policy, together with Appendix B, which is the associated Statement of Policy.

5.2. The Board has adopted a policy for the exercise of pensions discretions so that there is equitable and consistent treatment of all staff across all Boards within the Ely Group. It would be divisive if staff Terms and Conditions in respect of pensions discretions were different, according to which IDB held the Employment Contract.

APPENDIX A

LOCAL GOVERNMENT PENSION SCHEME EMPLOYER DISCRETION POLICY

The Board as an employing authority is required to formulate and publish a written policy statement on the certain discretions contained within the Local Government Pension Scheme (LGPS) Regulations.

Key discretions to be exercised in relation to active scheme members and members who cease active membership after 31st March, 2014

1. POWER TO GRANT EXTRA ANNUAL PENSION
[Regulation 31 of the LGPS Regulations 2013]

An employer may resolve to grant extra annual pension of up to £6,822 (figure at 1st April 2018) to an active scheme member or within 6 months of leaving to a member whose employment was terminated on the grounds of redundancy or business efficiency.

Policy:

The Board notes this discretion to award additional pension benefits. It has no intention to make use of this discretionary power on the basis of cost.

2. PURCHASE OF EXTRA ANNUAL PENSION
[Regulations 16(2)(e) & 16(4)(d) of the LGPS Regulations 2013]

An employer may resolve to, where an active scheme member wishes to purchase extra annual pension of up to £6,822 (figure at 1st April 2018) by making Additional Pension Contributions (APCs), to (voluntarily) contribute towards the cost of purchasing that extra pension via a Shared Cost Additional Pension Contribution (SCAPC).

Policy:

The Board notes this discretion to allow purchase of extra annual pension. It has no intention to make use of this discretionary power on the basis of cost.

3. FLEXIBLE RETIREMENT
[Regulation 30(6) of the LGPS Regulations 2013]

An active member who has attained the age of 55 or over who reduces working hours or grade of an employment, may with the Scheme employer’s consent, elect to receive immediate payment of all or part of the retirement pension to which that member would be entitled in respect of that employment if that member were not an employee in local government service on the date of the reduction in hours or grade, adjusted by the amounts shown as appropriate in actuarial guidance issued by the Secretary of State.

Policy:

The Board would consider allowing flexible retirement. Each case would be considered individually on its merits and a full report including a detailed financial analysis would be produced.

4. 85 YEAR RULE
[Paragraph 1(1)(c) of Schedule 2 of the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014]

An employer may decide whether, as the 85 year rule does not (other than on flexible retirement) automatically apply to members who would otherwise be subject to it and who choose to voluntarily draw their benefits on or after age 55 and before age 60, to switch the 85 year rule back on for such members. Where the employer does not do so, then:-

a) if the member satisfies the 85 year rule, that part of the member’s retirement benefits which is calculated by reference to any period of membership before the relevant date shall not be reduced in accordance with regulations 30(4) of 30A(4) of the Benefits Regulations or regulation 30(5) or (6) of the 2013 Regulations; and

b) if the member does not satisfy the 85 year rule, that part of the member’s retirement benefits which is calculated by reference to any period of membership before the relevant date is reduced by reference to the period between the date of the request and the date the member would satisfy the 85 year rule, of age 65 if earlier.

Policy:

The Board notes this discretion to apply the 85 year rule. It has no intention to make use of this discretionary power on the basis of cost.

5. WAIVE REDUCTION

An employer may resolve to waive any actuarial reduction for a member voluntarily drawing benefits before normal pension age other than on the grounds of flexible retirement (where the member has both pre 1/4/14 and post 31/3/14 membership on:-

a) compassionate grounds (pre 1/4/14 membership) and in whole or in part on any grounds (post 31/3/14 membership) if the member was not in the Scheme before 1/10/06.

b) compassionate grounds (pre 1/4/14 membership) and in whole or in part on any grounds (post 31/3/14 membership) if the member was in the Scheme before 1/10/06, will not be 60 by 31.3.16 and will not attain 60 between 1/4/16 and 31/3/20.

c) compassionate grounds (pre 1/4/16 membership) and in whole or in part on any grounds (post 31/3/16 membership) if the member was in the Scheme before 1/10/06 and will be 60 by 31/3/16.

d) compassionate grounds (pre 1/4/20 membership) and in whole or in part on any grounds (post 31/3/20 membership) if the member was in the Scheme before 1/10/06, will not be 60 by 31/3/16 and will attain 60 between 1/4/16 and 31/3/20.

In addition, an employer may also resolve to waive, in whole or in part, actuarial reduction on benefits which a member voluntarily draws before normal pension age other than on the grounds of flexible retirement (where the member only has post 31/3/14 membership).

Policy:

The Board notes this discretion to waive actuarial reductions. It has no intention to make use of this discretionary power on the basis of cost.

6. TRANSFER OF PENSION RIGHTS

An employer may resolve whether, with the agreement of the Pension Fund administering authority, to permit a scheme member to elect to transfer other pension rights into the LGPS if he/she has not made such an election within 12 months of joining the LGPS [regulation 100(6) of the LGPS Regulations 2013].

Policy:

The Board notes this discretion allow a time extension to transfer other pension rights into the LGPS. The Board will only allow this if the scheme member has requested investigations to commence within the 12 month time period.

7. EXTENSION OF TIME LIMIT FOR DEFERRED BENEFITS

An employer may resolve whether to extend the 12 month time limit within which a scheme member who has a deferred LGPS benefit in England or Wales following the cessation of employment (or cessation of a concurrent employment) may elect not to have the deferred benefits aggregated with their new LGPS employment (or ongoing concurrent LGPS employment) if the member has not made an election to retain separate benefits within 12 months of commencing membership of the LGPS in the new employment (or within 12 months of ceasing the concurrent membership) [regulations 22(7) and (8) of the LGPS Regulations 2013].

Policy:

The Board notes this discretion to allow a time extension to defer benefits. Board will only allow this if the scheme member has requested investigations to commence within the 12 month time period.

8. ALLOCATION OF CONTRIBUTION BANDS

An employer may resolve how the contribution band to which an employee is to be allocated on joining the scheme and at each subsequent April, will be determined and the circumstances in which the employer will, in addition to the review each April, review the pension contribution band to which an employee has been allocated following a material change which affects the member’s pensionable pay in the course of a scheme year (1st April to 31st March) [regulations 9 and 10 of the LGPS Regulations 2013].

Policy:

The Board will determine individual employee contribution rates on 1st April based on pensionable pay earned in the previous year plus any inflationary pay award. There will be no adjustments during the year.

9. CALCULATING ASSUMED PENSIONABLE PAY

An employer may resolve whether or not, when calculating assumed pensionable pay when a member is:-

– on reduced contractual pay or no pay due to sickness or injury, or
– absent during ordinary maternity, paternity or adoption leave or during paid additional maternity, paternity or adoption leave, or
– absent on reserve forces service leave, or
– retires with a tier 1 or tier 2 ill health pension, or
– dies in service

to include in the calculation the amount of any ‘regular lump sum payment’ received by the member in the 12 months preceding the date the absence began or the ill health retirement or death occurred. A ‘regular lump sum payment’ is a payment for which the member’s employer determines there is a reasonable expectation that such a payment would be paid on a regular basis [regulations 21(4)(a)(iv), 21(4)(b)(iv) and 21(5) of the LGPS Regulations 2013].

Policy:

The Board notes this discretion and does not include any ‘regular lump sum payment’ as pensionable pay. Therefore, it would not be included in the calculation for assumed pensionable pay.

APPENDIX B

STATEMENT OF POLICY REGARDING THE EXERCISE OF DISCRETIONS FOR EMPLOYERS WHO JOINED THE LOCAL GOVERNMENT PENSION SCHEME

Discretions from 1.4.14 in relation to post 31.3.14 active members (excluding councillor members) and post 31.3.14 leavers (excluding councillor members), being discretions under:

– the Local Government Pension Scheme Regulations 2013 [prefix R]
– the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 [prefix TP]
– the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 (as amended) [prefix B]
– the Local Government Pension Scheme Regulations 1997 (as amended) [prefix L]
    [table “” not found /]

Discretions in relation to scheme members (excluding councillor members) who ceased active membership on or after 1.4.08 and before 1.4.14, being discretions under:

– Local Government Pension Scheme (Administration) Regulations 2008 [prefix A]
– the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 (as amended) [prefix B]
– the Local Government Pension Scheme (Transitional Provisions) Regulations 2008 [prefix T]
– the Local Government Pension Scheme (Transitional Provisions and Savings) Regulations 2014 [prefix TP]
– the Local Government Pension Scheme Regulations 1997 (as amended) [prefix L]
    [table “” not found /]

Discretions under the Local Government Pension Scheme Regulations 1997 (as amended) in relation to scheme members who ceased active membership on or after 1.4.98 and before 1.4.08.

    [table “” not found /]

Discretions under the Local Government Pension Scheme Regulations 1995 (as amended) in relation to scheme members who ceased active membership before 1.4.98.

    [table “” not found /]

Note: benefits paid on or after age 50 and before age 55 are subject to an unauthorised payments charge and where applicable, an unauthorised payments surcharge under the Finance Act 2006. However, as the benefits had accrued prior to 6th April 2006, they would not generate a scheme sanction charge.

Discretions under the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2006 (as amended)

Under Regulation 7 of the Discretionary Compensation Regulations, each authority (other than an Admitted Body) is required to formulate and keep under review a policy which applies in respect of exercising their discretion in relation to:

    [table “” not found /]

Discretions under the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 (as amended)

These Regulations still apply to any Compensatory Added Years previously awarded by a Scheme Employer before 1 April 2007.  Scheme employers (other than admission bodies) who made awards of Compensatory Added Years are required to have a policy on the following:

    [table “” not found /]

Discretions under the Local Government (Discretionary Payments) (Injury Allowances) Regulations 2011

Scheme employers (other than admission bodies) must have a policy on:

    [table “” not found /]

 

This policy will be kept under regular review, by May 2022 if there are no material changes required before then.

I warrant that all the above policies reflect the policy intention of Burnt Fen Internal Drainage Board as at the Board Meeting on 23rd May, 2019.

Signed:

Name: Mr Derrick Sidney Beckett

Position: Chairman

Date:

Signed:

Name: Andrew Newton

Position: Engineer

Date: