Firemens Pension Scheme 1992 · CAS-84082-Y3B5

CAS-84082-Y3B5

Ombudsman’s Determination Applicant Mr R

Scheme Firemen’s Pension Scheme 1992 (the Scheme)

Respondents South Wales Fire & Rescue Authority (the Authority) Rhondda Cynon Taff County Borough Council (the Council)

Complaint Summary

Summary of the Ombudsman’s Determination and reasons

1 CAS-84082-Y3B5 Detailed Determination Material facts

The Authority is the Scheme Manager and the Council is the Scheme’s Administrator. The Scheme is governed by the Rules of the 1992 Order as amended. 1

On 31 December 2014, The Firefighters’ Pension (Wales) Scheme (Amendment) Order 2014 (the 2014 Order) was implemented. This Order made some retrospective amendments to the 1992 Order from 1 July 2013.

Prior to the 2014 Order, if a Firefighter was temporarily promoted in the last three years of their employment, they would benefit from the increase in salary in their pensionable pay calculation. This was because their average pensionable pay at retirement (the member’s ‘final salary’) was calculated using their best pensionable pay over the last three years. This was then used as the basis of their pension entitlement.

The 2014 Order amended Rule B5C (the New Rule). This changed the way in which pension benefits are calculated. 2 Under the New Rule, firefighters are awarded an Additional Pension Benefit (APB), in relation to any temporary promotion prior to their retirement, for the duration of that promotion. Because the extra salary while on temporary promotion does not count towards the final salary pension calculation, the overall benefit under the New Rule is not as great as it was prior to its implementation.

Mr R was born in March 1966. He was previously employed by the Fire and Rescue Service (the Service), and was an active member of the Scheme from 12 April 1985, until he retired on 24 June 2016.

Prior to his retirement, Mr R’s substantive post was Group Manager A Competent. He was previously temporarily promoted to the role of Group Manager B Competent from 16 June 2014 until 28 June 2015.

In March 2016, Mr R requested a retirement benefits quotation from the Council. The Council sent Mr R a retirement quotation dated 25 April 2016 (the Quotation). This informed Mr R that at retirement he could receive a lump sum of £196,579.55 and an annual pension of £29,846.93. His retirement benefit calculation included his temporary promotion salary.

At his retirement, Mr R received a lump sum of £197,243.25 and an annual pension of £29,586.49.

On 1 February 2019, the Service wrote to Mr R (the February Letter). A summary of the February Letter is detailed below, in paragraphs 12 to 22.

1 Relevant sections of the 1992 Order are in Appendix 1. 2 Details of the Old and New Rule B5C are detailed in Appendices 2 and 3.

2 CAS-84082-Y3B5 It had come to light at the end of November 2017, that the Authority had not implemented the New Rule and continued to treat temporary promotions as pensionable pay under the old regulations. It had included such payments in final salaries for pension purposes, where they had occurred within three years of retirement.

To address this situation, the Authority considered a report at its meeting on 26 March 2018. At this meeting, the Authority concluded that it was imperative to correct the position going forward, by implementing the New Rule. Doing so would prevent further miscalculations of pensions based on temporary promotions under the old regulations.

The Authority sought to implement the rule change in a fair and ethical manner, taking into account the situation retired members of the Scheme would be in, through no fault of their own. The Authority determined the following:-

As part of the 2017/2018 audit of accounts, the Wales Audit Office considered the decisions taken by the Authority to rectify the position going forward, and whether the Authority’s decisions, as detailed in paragraphs 14.1 to 14.3 above, were lawful. The advice the Auditor and the Authority itself received, indicated that it would be unlawful for the Authority to continue to make pension payments calculated using the old regulations, after the date the New Rule should have been implemented. The Authority had to reconsider its approach and previous decisions in respect of the implementation of the New Rule.

To correct the misapplication of the New Rule, the Authority would have to:-

3 CAS-84082-Y3B5 A further report was being presented to the Authority on 11 February 2019, to make three recommendations (the Recommendations), on how it should address the situation moving forward. 3

Mr R’s retirement benefits, at the time he retired, were based on pensionable earnings either in his final year before retirement or based on an average of pensionable earnings over a specified period prior to retirement. The pensionable earnings would have included any additional salary received during a period of temporary promotion during that time.

This resulted in the final salary figures used to calculate his pension benefits being inflated. His final salary pensionable pay should have been based solely on his substantive role at the point of retirement. Accordingly, he had been identified as having received an overpayment of benefits.

If, at its meeting on 11 February 2019, the Authority accepted the Recommendations, it would result in Mr R’s annual pension being adjusted with effect from 1 April 2019. But there would be no requirement for the Authority to recover any previous overpayment of pension, including lump sums, already paid, up to 31 March 2019.

It appreciated that the information in this letter would have been the first communication Mr R would have received in respect of this matter and that it would have caused him great concern. So, it provided details of the meetings it had arranged to discuss this matter, and asked Mr R to confirm if he would like to attend one of those meetings, or if he would like to have a meeting on an alternative date.

Subsequent to the Authority’s meeting on 11 February 2019, it would write to him to formally notify him of the decision the Authority had taken, in respect of the Recommendations.

On 12 February 2019, the Service sent Mr R a further letter detailing the outcome of the Authority’s meeting held the day before. This letter said the Authority had determined that:

3 The three recommendations are detailed in Appendix 4.

4 CAS-84082-Y3B5 Subsequently, Mr R made a complaint through stage one of the Scheme’s Internal Dispute Resolution Procedure (IDRP). A summary of his complaint is detailed below, in paragraphs 25 to 32.

In 2014, his father had been diagnosed with an aggressive form of dementia. This meant that the level of care he required would be progressively increased, and he would have ultimately needed full time residential care.

From that moment, his main aim was to support his father, to enable him to remain living independently at home, by providing a care package facilitated by the local authority and enhanced by him.

As his father’s condition deteriorated, his support increased and got to a level which was unsustainable while he was still in full time employment. If he was going to prevent his father from entering residential care at that time, he needed additional support.

By June 2016, he had completed over 30 years of service in the Scheme, so was eligible to retire with a full pension. He decided to do so as it allowed him to provide additional care for his father. However, for him to be able to take this option, he needed to ensure that his retirement benefits would have been adequate to support his family for the rest of his life.

Prior to deciding to retire, he considered:-

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6 CAS-84082-Y3B5 Summary of Mr R’s position

4 A summary of Mr R’s schedule of loss is detailed in the Appendix 5.

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5 Hanif v Middleweeks [2000] Lloyd’s Rep. PN 920 at [14] per Mance LJ 6 See Appendix 5

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Summary of the Authority’s position

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Conclusions

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7 Musawi v Bevis Trustees [2009] 055 PBLR - [2009] EWHC 1915 (Ch) at para 16 NHS Business Services Authority v Leeks & Ors [2014] EWHC 1446 (Ch) at para 59 NHS Pensions Agency and another v Pensions Ombudsman and Beechinor [1997] OPLR 99 at 102 Westminster City Council v Haywood [1998] Ch. 377 at 394 8 The disclaimer, such as it was, read: ““Please note that the details given to you are without prejudice and are subject to final details from [the Council]. Information only based on your current situation in order to make a decision, you should seek further financial advice.”

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9https://www.legislation.gov.uk/ukpga/1971/56/section/3

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Dominic Harris

Pensions Ombudsman 11 March 2025

10 Baugniet v Capita Employee Benefits Ltd (t/a Teachers’ Pensions) & Anor [2017] EWHC 501 11 https://www.pensions-ombudsman.org.uk/sites/default/files/publication/files/Updated-Non-financial- injustice-September-2018-2_0.pdf 12 Mr Lambden 74315/3, Miss Foster 82418/1 and Ms R (PO-18157).

19 CAS-84082-Y3B5 Appendix 1

“…

PART G

PENSIONABLE PAY AND CONTRIBUTIONS

G1 Pensionable pay and average pensionable pay

(1) Subject to paragraphs (2), (9) and (10), the pensionable pay of a regular firefighter is the aggregate of—

(a) the amount determined in relation to the performance of the duties of his role (whether as a whole-time or part-time employee) other than those amounts payable to him in respect of the benefits within rule B5C(5); and

(b) the amount (if any) of any benefits which are pensionable under rule B5C(1).

(2) …

(3) The average pensionable pay of a regular firefighter is, subject to paragraphs (5) to (7C), the aggregate of his pensionable pay for the year ending with the relevant date.

(4) The relevant date—

(a) for the purposes of rule C7 (spouse’s or civil partner’s award where no other award payable), and the Compensation Scheme, is the date of the person’s last day of service as a regular firefighter, and

(b) for all other purposes of this Scheme, is the date of the person’s last day of service in a period during which contributions were payable under rule G2.

(5) Subject to paragraphs (6) and (7), if he was in receipt of pensionable pay for part only of the year ending with the relevant date, his average pensionable pay is the aggregate of his pensionable pay for that part multiplied by the reciprocal of the fraction of the year which that part represents.

(6) For the purposes of paragraphs (3) and (5), any reduction of pensionable pay as a result of any—

(a) sick leave;

20 CAS-84082-Y3B5 (b) stoppage of pay by way of punishment;

(c) ordinary maternity, ordinary adoption or paternity leave;

(ca) parental bereavement leave;

(d) paid additional maternity or additional adoption leave; or

(e) unpaid additional maternity or additional adoption leave where contributions have been paid under rule G2A,

shall be disregarded.

(7) If the amount determined in accordance with paragraphs (3) to (6) is less than it would have been if the relevant date had been the corresponding date in whichever of the two preceding years yields the highest amount, that corresponding date shall be taken to be the relevant date.

(7A) The average pensionable pay of a regular firefighter who—

(a) is entitled to a long service increment; and

(b) retires after 30th September 2006 and before 1st October 2007, or becomes entitled to a deferred pension under rule B5 within that period,

shall be calculated—

(i) as if his long service increment had accrued at the rate of £990 per annum (disregarding the reduction in the amount of the long service increment that had effect in relation to times on and after 1st October 2006), and

(ii) disregarding any LS-related payment.

(7B) The average pensionable pay of a regular firefighter who—

(a) is entitled to additional pension benefit under rule B5B (additional pension benefit: long service increment), and

(b) retires on or after 1st October 2007,

shall be calculated on the basis of whichever of the following paragraphs yields the greater amount—

(i) the calculation is made with regard to the amount credited to him under rule B5B, but without regard to his long service increment and any LS-related payment, or

21 CAS-84082-Y3B5 (ii) the calculation is made with regard to his long service increment and any LS-related payment, but without regard to the amount credited to him under rule B5B.

(7C) The average pensionable pay of a regular firefighter shall be calculated without reference to any additional pension benefit credited under rule B5C (additional pension benefit).

22 CAS-84082-Y3B5 Appendix 2

“B5C Additional pension benefit: continual professional development

(1) A regular firefighter who, in any CPD year beginning with the year commencing on 1st July 2007, receives CPD payments, shall be credited with an amount of additional pension benefit in respect of that year.

(2) Subject to paragraph (3), the amount of additional pension benefit in respect of a CPD year shall be determined on 1st July immediately following the year in question in accordance with guidance and tables provided by the Scheme Actuary.

(3) Where the Retail Prices Index for the month of September preceding the relevant tax year is higher than it was for the month of September in the CPD year in question, the amount of additional pension benefit for that CPD year (as calculated in accordance with paragraph (2) and, if applicable, this paragraph) shall be increased by the same percentage as the percentage increase in the Retail Prices Index.

(4) Any increase in accordance with paragraph (3) shall be applied with effect from the first Monday of the relevant tax year.

(5) In this rule—

“CPD payments” , as regards a firefighter, means payments made to him by his employing authority in respect of his continual professional development;

“CPD year” means a period of 12 months beginning with 1st July in which a firefighter is in receipt of CPD payments;

“tax year” means a tax year in relation to which—

(a) the amount of a firefighter’s pension benefits is calculated for the purposes of this Scheme, and

(b) he is not in receipt of a pension under this Scheme or entitled to a deferred pension under rule B5;

and a tax year is a relevant tax year in relation to a particular CPD year if it is the tax year in which CPD payments for that CPD year are taken into account; and

“tax year” means the period of 12 months beginning with 6th April.”

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“…

B5C Additional pension benefit

(1) Where a fire and rescue authority determines that the benefits listed in paragraph (1) are pensionable, and in any additional pension benefit year pays any such pensionable benefits to a regular firefighter, the authority shall credit the firefighter with an amount of additional pension benefit in respect of that year.

(2) Subject to paragraph (3), the amount of additional pension benefit in respect of that year shall be determined on 1st July immediately following the year in question in accordance with guidance and tables provided by the Scheme Actuary.

(3) The amount of additional pension benefit determined in accordance with paragraph (2) shall be increased on the first Monday of the following relevant tax year by the same amount as any increase which would have applied if that additional pension benefit were a pension to which the Pensions (Increase) Act 1971 applied and the beginning date for that pension were the 1st July of the tax year immediately before the relevant tax year.

(4) For the avoidance of doubt, the increase of additional pension benefit in the tax year 2010/2011 shall be increased by the same percentage as the percentage increase in the Consumer Prices Index in September 2010 with effect from Monday 11th April 2011.

(5) The benefits referred to in paragraph (1) are—

(a) any allowance or supplement to reward additional skills and responsibilities that are applied and maintained outside the requirements of the firefighter’s duties under the contract of employment but are within the wider functions of the job;

(b) the amount (if any) paid in respect of a firefighter’s continual professional development;

(c) the difference between the firefighter’s basic pay in their day to day role and any pay received whilst on temporary promotion or where he is temporarily required to undertake the duties of a higher role;

(d) any performance related payment which is not consolidated into his standard pay.

(6) In this rule— 24 CAS-84082-Y3B5 “additional pension benefit year” means the period of 12 months beginning with 1st July in which a firefighter is in receipt of any of the benefits listed in paragraph (5).

“the beginning date” means the date on which the pension is treated as beginning for the purposes of section 8(2) of the Pensions (Increase) Act 1971;

“following relevant tax year” means the tax year after the relevant tax year, in relation to which the member is not a pensioner member or entitled to a deferred pension under rule B5;

“relevant tax year” means a tax year in relation to which—

(a) the amount of a firefighter’s pension benefits determined under this rule for the purposes of this Scheme is taken into account for tax purposes, and

(b) the firefighter is not in receipt of a pension under this Scheme or entitled to a deferred pension under rule B5; and

“tax year” means the period of 12 months beginning with 6th April.”

25 CAS-84082-Y3B5 Appendix 4

“The first recommendation is that the Fire Authority confirms that temporary promotions are pensionable, and that this decision is applicable from the effective date of the new Rule B5C, i.e. 1 July 2013.

The second recommendation is that the Fire Authority adjust all future pension payments made after 31 March, 2019, to ensure they are calculated and made on the APB basis.

The third recommendation is that the Fire Authority does not recover any overpayment of lump sum or pension made prior to 1 April, 2019.

The second and third recommendations are based on the principle that there is already a precedent set in respect of recovering pension overpayments in the public sector. The general approach taken by public sector pension schemes to this issue has been to reduce future pension payments to the correct level going forward and to waive the repayment of any historic overpayments to avoid financial hardship to members.”

26 CAS-84082-Y3B5 Appendix 5 Mr R provided detailed calculations of the past losses he believed he incurred between 26 June 2016 and 12 April 2022. He also provided a summary of the future losses that he believes he will incur. A summary of these losses is detailed below.

Past loss

13 This is Mr R’s best estimate figure. 14 This figure is the amount after Mr R deducted the pension payments he had actually received during the same period. 27