Pension ombudsman ruling – updated

Following on from the Pensions Ombudsman’s determination dated 13 May 2015 on the complaint brought by Mr W Milne, a retired firefighter, that the Government Actuary’s Department (GAD) was guilty of maladministration in failing to identify that it had an ongoing responsibility to calculate appropriate factors for commutation of pension benefits for cash lump sums. The Government has decided that additional payments are to be made in respect of certain scheme members who chose to commute pension for lump sum at the time of retirement.

Who does this affect?

For members of the Firefighters’ Pension Scheme (FPS):

  • males who retired between 1 December 2001 and 21 August 2006 and opted to commute part of their pension for lump sum
  • females who retired between 1 December 2004 and 21 August 2006 and opted to commute part of their pension for lump sum

How will the additional payments be calculated?

To enable the additional payments to be calculated, historic records need to be looked at to determine:

  • whether the maximum commutation was used and if it was subject to the maximum 2 ¼ times the pension
  • the commutation factor used and the lump sum this provided
  • the amount of pension before and after commutation

Calculate the additional benefits as at date pension commenced using the reconstructed commutation factors issued by GAD.

Type of member Form of additional payment
Not subject to maximum commutation amount of 2 ¼ times the annual pension Lump sum
Subject to maximum commutation amount of 2 ¼ times annual pension, original lump sum equal to 2 ¼ times annual pension Additional pension, with backdated arrears of pension paid as a lump sum
Subject to maximum commutation amount of 2 ¼ times annual pension, original lump sum less than 2 ¼ times annual pension

Members option of either:

  • lump sum or
  • Additional pension, with backdated arrears of pension paid as a lump sum

Calculate the interest which is payable on the additional payments based on the Bank of England base rates.

How will members be notified?

  • Relevant members will be written to, giving them details of the amounts of the additional benefits that are payable, this letter will enclose a discharge form
  • Before any payments can be made to members, a signed discharge form will be required
  • The discharge will state that the payments received are in full and final settlement of any actual or potential claims arising from or connected to the commutation of their pension, and that they agree to withdraw any cases already brought to the Ombudsman, GAD, Home Office, Hampshire Fire & Rescue Authority, Hampshire Constabulary or Hampshire Pension Fund
  • When the member has completed and returned the signed discharge form, payment will be made at the agreed date

When will this happen?

  • The group of relevant members have already been identified by Hampshire Pension Fund
  • GAD are expected to issue a spreadsheet calculator to enable bulk calculations to be performed by the end of August 2015
  • Hampshire Pension Fund will, once approval is given from Hampshire Fire & Rescue Authority and Hampshire Constabulary, commence the work to collate the necessary individual information. This is estimated to be commenced by the end of August 2015
  • Hampshire Pension Fund will then calculate the additional benefits and aim to write to members by the end of September 2015
  • Members will have one month to return the discharge forms
  • Additional payments will start to be made, upon receipt of the discharge form, from 1 November 2015
  • Hampshire Pension Fund hopes to have all payments completed by the end of December 2015