Firemens Pension Scheme 1992 · CAS-84081-R5F2

CAS-84081-R5F2

Ombudsman’s Determination Applicant Mr E

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 Mr E has complained about the Authority’s maladministration in failing to implement an amendment to the Firemen’s Pension Scheme Order (1992) (the 1992 Order). He asserts that he has suffered a financial loss because of the Authority’s maladministration.

Summary of the Ombudsman’s Determination and reasons

1 CAS-84081-R5F2 Detailed Determination Material facts

Mr E was born in 1965. He was previously employed by the Fire and Rescue Service (the Service) and was an active member of the Scheme from 11 April 1983 until he retired in November 2015.

On 27 October 2014, Mr E was temporarily promoted to the role of Group Manager A (Development) (Group Manager), his substantive role at the time was Flexible Duty Station Manager (Competent). On 22 July 2015, Mr E was substantively promoted to the role of Group Manager.

Around the time of his promotion, Mr E specifically requested and received from the Council confirmation that his retirement benefits would be calculated using his temporary promotion salary.

On 14 September 2015, the Council sent Mr E a retirement benefit quotation (the Quotation). This informed Mr E that the benefits he could receive at retirement were a lump sum of £177,041.18 and an annual pension of £26,556.18. His retirement benefit calculations were calculated using his temporary promotion salary.

Mr E received the benefits stated on the Quotation, when he retired on 4 November 2015.

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-84081-R5F2 On 1 February 2019, the Service wrote to Mr E (the February Letter). A summary of the February Letter is detailed below, in paragraphs 13 to 23.

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.

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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 E’s pension 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, as additional salary received during a period of temporary promotion should have been excluded. His final pensionable salary should have been based solely on his substantive, rather than his temporary, role when he retired. Accordingly, he had been identified as a recipient of an overpayment of benefits.

If, at its meeting on 11 February 2019, the Authority accepted the Recommendations, it would result in Mr E’s annual pension being adjusted with effect from 1 April 2019. However, 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 E 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 E to confirm whether he would like to attend one of those meetings or whether he would like to have a meeting on an alternative date.

Following 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 E 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.

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Subsequently, Mr E made a complaint through the first stage of the Scheme’s Internal Dispute Resolution Procedure (IDRP). In summary he said:-

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Summary of Mr E’s position

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

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In light of Allied Maples and Perry, the following questions needed to be asked:

The role of Group Manager (Competent) would not have been a promotion for him, it was a pay scale within the same rank. With the passage of time, a Group Manager moved to Group Manager (Competent). This was not akin to obtaining a promotion. Moving to a pay scale within the same rank did not require any competition or application process. It was a mere formality whereby someone in a development rank submitted a portfolio of evidence to demonstrate that they met the competent criteria.

It was his view that:-

5 Mr E provided to the Pensions Ombudsman, a letter from his previous line manager to support his assertion that he would have obtained the role of Group Manager (Competent). 7 CAS-84081-R5F2

Turning to the measure of loss to be awarded to him, for the loss of chance of a promotion, he submitted that:-

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

8 CAS-84081-R5F2 Overpaid pension contributions and loss of spouse’s pension

As a result of the Authority’s negligence, he paid pension contributions at a higher rate than he otherwise would have because his temporary promotion pay was not pensionable. The contributions on his temporary promotion pay were 15.5% of a higher salary, whereas contributions on his substantive pay were 15.5% of a lower salary. He estimated that he had overpaid pension contributions in the region of £770.20, and that he was entitled to credit for this amount, as well as an indemnity as to any underpaid tax.

He was entitled to claim for the loss of spousal pension. As he would have continued working until July 2016, he would have had a higher pensionable salary. So, even before taking into account any chance he had of retiring on a higher salary, there was a claim for loss in respect of his spouse’s pension. Any loss of chance calculation should also take into consideration the lower spouse’s pension.

Costs of an independent financial adviser

He intended to seek financial advice in respect of purchasing an annuity with the amount he will be awarded. So, he was seeking the cost of a financial advisor to advise upon and assist with the purchase of an annuity.

Distress and inconvenience

Subsequent employment

In September 2015, he set up a Fire Safety Consultancy through a limited company. He would have done the same if he had retired nine months later. 7

Summary of the Authority’s position

7 Mr E provided a letter from his accountant showing that his total earnings between 4 November 2015 to 22 July 2016 inclusive, was in the region of £5,000.

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8 Hirtenstein v Hill Dickinson LLP [2014] EWHC 2711 and PCP Capital Partners LLP and another v Barclays Bank plc [2021] EWHC 307 11 CAS-84081-R5F2

9 Mr E provided an example of why he believed interest was material, using his salary.

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Conclusions

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10 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 11 The disclaimer 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.” 14 CAS-84081-R5F2

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12 Stevens v Cannon [2005] EWCA Civ 222, Verlander v Devon Waste Management Ltd [2007] EWCA Civ 835 17 CAS-84081-R5F2

Directions

13 Provided that this does not exceed the maximum accrual of pensionable service under the Scheme Rules.

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Dominic Harris

Pensions Ombudsman 11 March 2025

20 CAS-84081-R5F2 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;

21 CAS-84081-R5F2 (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

22 CAS-84081-R5F2 (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).

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“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;

“relevant 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— 25 CAS-84081-R5F2 “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.”

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“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.

27 CAS-84081-R5F2 Appendix 5 A summary of Mr E’s schedule of loss

Mr E provided detailed calculations of the past losses he believed he incurred between November 2015 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

14 This is Mr E’s best estimate figure. 15 This figure is the amount after Mr E deducted the pension payments he had actually received during the same period. 28 CAS-84081-R5F2

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