New Firefighters Pension Scheme Modified Section Retained Firefighters · CAS-72510-R0F4

CAS-72510-R0F4

Ombudsman’s Determination Applicant Mr S

Scheme The New Firefighters’ Pension Scheme (modified section for retained firefighters) (the Modified Scheme)

Respondent Humberside Fire & Rescue Service (HFRS)

Outcome

Complaint summary

• He never received an adequate explanation of the calculation of the amount deducted from his retirement lump sum in respect of his backdated membership of the Modified Scheme. He was also misinformed in relation to the cost of the backdating.

• He had encountered delays when dealing with HFRS and had received no acknowledgement of his communications. It had only responded when he threatened to raise a complaint.

• He had received no apology from HFRS for its maladministration and had not been offered any redress for the distress and inconvenience it had caused him.

Background information, including submissions from the parties and timeline of events The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties. CAS-72510-R0F4

“In order to enrol into the modified scheme with effect from 1 July 2000 and uplift your membership from 2006 membership to modified pension the contributions that will be required to be paid will be £16268.61, including interest. […]

This payment will effectively provide you with an additional membership of 2.75 years within the modified pension scheme and uplift 5.05 years to the modified scheme from the 2006 scheme.”

• by payment of a lump sum within six months of his election to accept the offer;

• by payment of periodic contributions over a period of 10 years. Under this option, any outstanding balance when he became entitled to his pension had to be paid within three months. One option would be for him to pay this from his retirement lump sum; or

• by deduction from his retirement lump sum.

“Alternatively, you will have the option of purchasing your past service rights by means of making periodic contributions over a spreading period of 10 years (which will include interest), or up to the point where you retire, whichever comes earlier.”

2 CAS-72510-R0F4

• Mr S emailed HFRS to confirm he was likely to retire in July 2019, at age 55. He asked for an update on his pension benefits and the amount of contribution arrears that were outstanding.

• HFRS responded to confirm that Mr S had commenced his arrears payments in May 2016 and a total of 27 monthly payments had been made up to 31 July 2018. The payments made totalled £4,634.01, leaving a balance of £14,502.49 to be paid.

• Mr S queried the figures provided by HFRS. He said he had a total to repay of £16,905.31, as stated in its letter of 18 February 2016. However, the latest figures it had provided totalled £19,136.50.

• HFRS advised that an error in a formula in a spreadsheet had resulted in it providing incorrect information earlier that day. It confirmed that the outstanding balance was £12,271.30.

3 CAS-72510-R0F4

• WYPF’s forecast sent to him by HFRS on 26 March 2019 estimated arrears of contributions due at 30 September 2019 of £11,841.06. He considered this to be higher than it should be.

• HFRS’ letter of 18 February 2016 stated he was required to repay £16,905.31 at a rate of £171.63 a month. He had calculated that he would have £10,040.11 left to pay if he retired in July 2019. He was considering this to be a maximum figure, as he was expecting the interest due figure to be reduced.

• He had not been advised clearly enough in February 2016 to have been able to consider the different options available at the time. Had he been made aware of the sum now due at the inception of the process he would have opted for a lump sum payment.

• He was now facing an additional sum of approximately £1,800 to repay.

4 CAS-72510-R0F4

• HFRS emailed Mr S. It said that WYPF had advised that there was no scope for him to change the option he had chosen when joining the Modified Scheme.

• Mr S confirmed to HFRS that he had previously queried why the total contribution arrears figure had increased by approximately £1,800.

• Mr S sent a further email to HFRS to let it know that he was considering raising a complaint.

• Any incorrect information he had been provided with should be explained and, where necessary, put right.

• He had not received an adequate response to his emails of 5 and 24 April 2019, requesting an explanation as to why the figures were significantly different.

• Mr S was employed prior to 1 July 2000 and had joined the 2006 Scheme when it was instigated. Hence, he had the option to enrol in the Modified Scheme for the period from 1 July 2000 to 5 April 2006 and convert his service to modified service. To do this, he was required to pay full contributions for the period from 1 July 2000 to 5 April 2006 and the difference in contributions from 6 April 2006.

• Due to the timescales of the option exercise, the contributions arrears figure had to be recalculated during the process.

• It had been provided with a spreadsheet by the Government Actuary’s Department (the Spreadsheet) to undertake the arrears calculation. This could only be used for service up to 31 August 2015. The option exercise was not

5 CAS-72510-R0F4 completed until March 2016. So, it had to calculate some additional contribution arrears for the period from September 2015 to February 2016. This had resulted in an additional £455.43 being due. As a result, £16,905.31, being £16,449.88 plus £455.43, was due.

• The Spreadsheet calculated the monthly contributions that were due, including interest, as being £167.83 in respect of Mr S’ service to 31 August 2015. A further £3.80 was added in respect of the additional £455.43. This increased the monthly payment to £171.63, payable over a 10-year period. The total of the payments due was £20,595.60, which included interest of £3,700.29. This was the interest applicable if the contribution arrears were repaid over 10 years.

• It acknowledged that this was not explicitly detailed in its correspondence with Mr S. However, references had been made to the fact that interest would be payable.

• When Mr S retired before the end of the 10-year period, a recalculation was undertaken. The outstanding amount due was calculated as £11,971.15. It acknowledged that there had been some confusion in relation to the calculation of the amount to be deducted from Mr S’ retirement lump sum. This had highlighted some issues with its communications with WYPF.

• Mr S highlighted where its responses had not been timely or had been contradictory. It apologised for this and the fact that the documentation issued during the option exercise did not provide sufficient clarity around the calculation of the interest. However, it did provide Mr S with the monthly repayment figure and the period of recovery, which was considered sufficient at the time for him to assess the options.

• During its investigation into Mr S’ complaint, it was identified that one payment of the contribution arrears was not taken into account when carrying out the final calculations. The correct amount to be deducted from Mr S’ retirement lump sum was £11,841.06, a decrease of £130.09.

• Following the settlement of a recent wage award, Mr S’ pension had been recalculated. WYPF was in the process of writing to him to detail the revision, and a payment would be sent to him including the £130.09.

• He had only ever been provided with estimated figures and had never seen any communications stating that the sum he actually owed was in the region of £20,595. He questioned whether he owed an additional £4,000. The fact that he had been given false expectations amounted to maladministration.

• Details of the original and final calculations had not been provided for him to review as he had requested.

6 CAS-72510-R0F4 • He had never queried the monthly amounts deducted from his salary or the period over which deductions were to be made. His complaint primarily concerned the amount deducted from his retirement lump sum.

• HFRS’ response skirted around issues and did not answer the questions he had raised.

• It was required to apply the Regulations that govern the Modified Scheme including the use of the Spreadsheet. These had been applied correctly.

• The Spreadsheet determined that, on joining the Modified Scheme, Mr S owed £16,449.88 in contribution arrears. This figure included £3,127.89 of interest. If he had paid this sum immediately then no further interest would have been added.

• The Fire Brigades Union (the Union) had negotiated a 10-year repayment period. In the case of Mr S, this had resulted in further interest of £3,689.72 being payable. It had also been agreed with the Union that any outstanding contributions due would be deducted from the lump sum at retirement. A sum of £11,971.15 was outstanding at Mr S’ retirement.

• These figures related to the backdating of Mr S’ membership of the Modified Scheme for the period from 1 July 2000 to 31 August 2015. An additional amount of £455.43 for the period from 1 September 2015 to 28 February 2016 was collected at the rate of £3.80 a month.

• He had signed the Form in October 2015 based on incomplete information. He would have viewed the options available to him differently if he had been aware of the position in relation to future interest.

• HFRS had given him a figure of £16,905.31 for the contribution arrears that were due. He questions why interest for the full period of recovery was not included when HFRS was aware that he had elected to pay the arrears over a 10-year period.

• When he queried the sum due in August 2018, HFRS said that the amount still owing was £12,271.30. He questions why HFRS’ mistake of not disclosing the full interest was not rectified then. He says that, given that he had questioned the figures, it was clear that he did not have a full understanding of them. However, he was not provided with a full explanation.

• Even if WYPF was responsible for the calculation of his final benefits and contribution arrears, HFRS was responsible for the figures used in the calculations.

7 CAS-72510-R0F4 • HFRS’ apology had only been issued when he made his formal complaint. Its response was inadequate given the time and effort he had spent analysing the figures and the inconvenience he had experienced waiting for responses which were always delayed.

Adjudicator’s Opinion

• The final figures that Mr S received before returning a valid option election form were provided by HFRS on 25 September 2015. These quoted a contribution arrears figure of £16,449.88 and an instalment figure of £167.83, payable over 120 monthly payments. The first figure did not include future interest. However, the instalment figure equated to a total payment of £20,139.60, which included future interest. It was later acknowledged by HFRS that these figures were incomplete. They did not cover the backdating of Mr S’ membership of the Modified Scheme for the period from 1 September 2015 to 28 February 2016.

• On 18 February 2016, Mr S was quoted a revised contribution arrears figure of £16,905.31, and an instalment figure of £171.63 payable for 120 monthly payments. These figures rectified the earlier omission where part of Mr S’ service had not been allowed for in the calculation. Again, the contribution arrears figure did not include future interest, but the instalment figure did. The instalment figure equated to a total payment of £20,595.60, which indicated that future interest of £3,690.29 had been allowed for.

• On 13 August 2018, Mr S requested confirmation of how much contribution arrears he had left to pay. He was initially quoted an incorrect figure, but this was corrected later that same day. The correct information that HFRS supplied was based on 27 instalments having been made, resulting in £12,271.30 being outstanding. This figure did not include future interest.

• HFRS sent Mr S a further update on 24 April 2019. By this time, it was aware that Mr S planned to retire on 30 September 2019. The figure it provided was an outstanding balance of £11,878.52 as at 30 September 2019. Unlike previous quotes, the future interest that would be due up to that date was included. As Mr S was paying off the contributions arrears earlier than originally planned, the interest included in this figure was lower than the £3,690.29 previously allowed for.

• Final adjustments were made to the figures, resulting in a deduction from Mr S’ retirement lump sum of £11,841.06. 8 CAS-72510-R0F4

9 CAS-72510-R0F4 • retirement estimates based on a number of scenarios that Mr S had requested on 15 January 2019, which Mr S confirmed on 21 March 2019 he had received from WYPF; and

• a request for an explanation in relation to the contribution arrears figures that Mr S had requested on 24 April 2019. This was only partially responded to on 25 June 2019.

Mr S did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider.

Mr S provided his further comments in response to the Opinion. In summary, he said:-

• Some of the information provided by HFRS had been difficult to understand. Financial information should be displayed concisely, and he should not have had to question and correct information to the degree that he did.

• He believes that he is entitled to compensation for HFRS’ maladministration and the inconvenience he suffered. He spent considerable time raising issues, spotting mistakes and trying to understand something that should have been far simpler.

• HFRS should be held accountable. It should be directed to make the position clear to everyone it originally wrote to concerning this matter, so no other individual has to rely on the same substandard information it had provided to him.

10 CAS-72510-R0F4

Ombudsman’s decision

11 CAS-72510-R0F4 I do not uphold Mr S’ complaint.

Anthony Arter CBE

Deputy Pensions Ombudsman 6 October 2023

12